Leaked confidential documents from Panamanian law firm Mossack Fonseca show how the Kufuor administration committed Ghana to an agreement with a foreign company for the development and operation of a five-star luxury hotel in Accra before seeking parliamentary approval.
According to the leaked files, suspended chairman of the opposition New Patriotic Party (NPP) Paul Afoko received over half a million dollars for fronting as a “nominee director” for the offshore company.
Documents show that on 15 February 2006, the government of Ghana entered into a Memorandum of Understanding (MoU) for the development of the 300 000m² decommissioned Accra Racecourse site. Under former president John Kufuor, the Ghanaian government committed Cascade Development Company and its affiliates, the firm that constructed the Kempinski Hotel, to a preliminary outline plan to develop the site into a user complex. The site, once inhabited by squatters, would see development of a five-star hotel, along with an office building, residential buildings and a shopping mall.
Former chief of staff under the Kufuor administration, Kojo Mpiani, says he signed the MoU because the developers showed serious intent. The supporting agreement between the government and Cascade Development Company was given executive approval afterwards. Mpiani explains that the deal didn’t go through cabinet approval because the president had the power to approve such agreements if he was satisfied with the details after review, which explains why the support agreement sent to Parliament for approval was given executive approval.
The leaked confidential document from the office of the president dated 21 October 2008 says:
I refer to your request for executive approval on the above subject matter dated 14 October, 2008. His Excellency the President has given Executive approval for the support agreement between Government of Ghana and Cascade Development Company for the development of a five-star hotel at the Accra Race Course.
In the agreement, the government committed to sublease the land for 50 years. The agreement also required Cascade Development Company to manage the Accra International Conference Centre. The final agreement was signed on 11 January 2007. Article 181(5) of the Ghanaian Constitution says that parliamentary approval is required in respect of “international business transactions” which the state of Ghana is a party to. The parliamentary approval, however, was sought a year after the government signed an agreement with the Cascade Development Company. Chairman of the Parliamentary Select Committee on Finance, James Avedzi, whose party was in opposition during the period, says the government erred in signing the agreement before seeking parliamentary approval.
In the supporting agreement approved by Parliament, the government indemnified the Cascade Development Company and Gold Coast Resort International “from any liability to pay any tax on the income, profits, whether actual or accrued, earned or made by Cascade Development Company and its affiliates in respect of each sub-phase for a period of five years from the completion of such relevant sub-phase.” Avedzi says these exemptions were granted in line with government’s vision of making Ghana a preferred tourist destination.
The exemptions also touch on imports of necessary materials and equipment for the project, as well as the withholding tax on dividends, royalties, license fees, rental payments and management fees paid by Cascade Development Company. But, lecturer at the University of Ghana Business School Dr Ibrahim Bedi is raising questions about the exemptions on the withholding tax paid by the developer and its affiliates with effect from opening of each sub-phase and continuing for a period of five years from the date of completion of each sub-phase. According to Bedi, this exemption is meant for real estate developers constructing apartments for low and middle income earners, and not the developer of luxurious hotel.
This means, it gives Kempinski Hotel undue advantage over its competitors, such as Paloma Hotel, Labadi Hotel, Golden Tulip, Alisa Hotel and La Palm Royal Beach Hotel among others. The exemptions will enable the management of the hotel to improve their services or cut down cost of production, Bedi argues.
The Chairman of the Parliamentary Select Committee on Finance disagrees. He says the exemptions must not be singled out but must be seen as a package to attract investors.
The exemptions were granted under the Ghana Investment Promotion Centre incentives (GIPCI). Deputy Commissioner for Policy and Domestic Tax at the Ghana Revenue Authority Edward Gyamera explains that even though Cascade Development Company and its affiliates were granted all of the exemptions, incentives and tax concessions provided for in the GIPC, it is not possible for investors to enjoy all exemptions.
Two months after the government of Ghana signed the MoU with the developers, Gold Coast Resorts International was incorporated, on 19 April 2006. It appointed Cascade Development Company. through its Ghana subsidiary, to develop the five-star hotel complex. Gold Coast Resorts is a web of offshore entities, with the largest shareholder of the company (45%) being Zakhem International SA, an entity registered in the tax haven of Luxembourg. At least two other shareholders of the Gold Coast Resorts – Bethana Investments Inc and Uridor Investments SA – were registered in Panama, another known tax haven. The government of Ghana, through the Ghana Tourist Board, owns 10% of Gold Coast Resorts.
The Panama Papers confirm that Afoko, a leading member of the NPP and close friend of Kufuor was a shareholder in Gold Coast Resorts International. However, he transferred his shares to Zakhem International on 15 July, 2009. The transfer value of the shares was $640,000. The reason for the transfer is unclear, but Mr. Afoko is believed to have played a lead role in negotiations on behalf of an offshore company and the government during the period the NPP was in power. Afoko declined to comment on the story.
The extent of the relationship between Afoko and Marwan Zakhem, a manager at Kempinski Hotel, are unclear, but Mossack Fonseca’s records show that Zakhem’s name appears on the register of directors and officers of Afoko’s oil firm, the West African Petroleum Company.
Afoko and Zakhem are shown in the documents as registered members of the company, which was registered in the British Virgin Islands. Zakhem had 250 shares, which were received on 13 January 2005. However he ceased to be a member of the company on 12 August 2010 and transferred his shares on the same date. Curiously, the Z2 Group Limited, which Zakhem is a director of, entered the register as member on 12 August 2010. In the leaked files, Zakhem is listed as a director GCC Resorts Limited, Zakhem Construction (Ghana) Limited and Cascade Development Company, the entity that constructed the five-star luxurious hotel. When officials of Kempinski Hotel were contacted, they too declined to comment, saying they only offer technical expertise to owners of the facility.
On 15 July 2009, two months after Afoko was allocated his shares, he transferred them to Zakhem International SA for $640,000. Files show, however, that Afoko is still a shareholder in the company. When the company files were updated by on 26 November, 2012 by Bryan Scatliffe, the assistant secretary for and on behalf of Mossack Fonseca, Afoko’s name was still on the list with 576,000 shares.
According to the records available at the registered office, the shareholders of the company are:
Shareholders No of shares
Zakhem International SA 5,760,000
Funsho Moses Kupolokum 2,205,000
Bounville Holdings Ltd 2,295,000
The Government of Ghana 1,280,000
Uridor Investments SA 1,260,000
Bethana Investments Inc 900,000
Paul Afoko 576,000
Ghana Tourist Board 1,280,000
Mossack Fonseca’s records show the shareholding structure of Gold Coast Resort International:
Shareholders No of shares % represented
Zakhem International S.A. 5, 760 000 45%
Funsho Moses Kupolokun
(former aide to Nigeria President Olusegun Obasanjo) 1, 800, 000 14%
Bounville Holdings Limited (Seychelles) 1, 800 000 14%
Ghanian Government 1, 280, 000 10%
Uridor Investments S.A. 1, 260, 000 9.84%
Bethana Investment Inc (Panama) 900, 000 7%
Paul Afoko 576, 000
The shareholders provided funds for the financing of the project. The government was allotted the shares in terms of the support agreement signed on 15 July 2009. One of the emails between Mossack Fonseca and Gold Coast Resorts International states that “the activity of this company is a holding company of a Ghanaian subsidiary. GCRI has invested in the Ghanaian subsidiary for the development and operation of a five-star luxury hotel in Accra, Ghana.”
George Kwatia, Ghana tax partner at PWC, said the benefits for the offshore companies far outweighed the benefits for Ghana’s economy.
Tax justice campaigner Bernard Adjei argued that incorporating offshore companies is a mechanism deployed by businesses to either pay low tax or avoid paying revenues to the government in the countries where they operate.
Adjei wants government to plug legal loopholes that give offshore companies one-sided advantages of bilateral agreements that are signed. – Panama Papers