Basic_Telco_Billing_Diagram

Credit: original diagram by Aayush

Look carefully at the diagram above.

1. From 2010, and especially 2015, onwards, agents of the Ghanaian government (notably contractors, GVG, Afriwave and Subah) used to collect logs termed as Call Detail Records (CDRs) generated by the Authentication, Authorisation & Accounting (AAA) systems of the telecom network from network switches. A module of the AAA called the Service Control Point (SCP) interfaces between the live network and the software system that does the billing.

2. As you can see from the diagram, those CDR records are useless until they are “interpreted” by the charging system (the part encircled in blue). Easy way to understand: supposed you call a friend and he/she does not pick. Supposed someone just counts this call and claims that the telco collected money for it. Would that be sensible? So, in essence, the CDRs have little meaning unless the telco also provides the tariff scheme, charging rules, discount schedule (for all the promos etc), among other algorithms. That is what the part enclosed by the blue circle in the diagram does.

3. Whether due to ignorance or neglect, it has now come to light that much of what Ghana has been billed for (at least $32 million a year for a while now) so far in the name of “monitoring” lying and dishonest telcos by sending CDRs to contractors has just been driven by ignorance. The contractors have been relying on the telco’s reinterpretation of their own data.

4. Most Ghanaians appear confused by the development because they had assumed that by “monitoring” it was meant that the contractors were actually deploying equipment in the part enclosed by the green circle. That is the base station controllers. That would of course have been a joke if the point is to accurately measure revenue to the last dollar. Even the telcos themselves don’t “count calls on masts”.

5. What the Ghanaian government now says it will do is, in the words of its spokespersons, “live monitoring”. That means the telcos won’t be emailing the CDRs in batch on excel spreadsheets. The new Ghanaian contractors – KelniGVG – shall collect the CDRs one after one in a continuous stream. Unfortunately, that would still be useless without relying on the telcos’ charging software to provide the relevant context such as which calls and data downloads were charged and for how much (rating, metering and billing).

6. Government officials have thus been at pains to clarity that the contractor shall also be collecting the billing reports (service charge records). But it is the same CDRs (or IPDRs, in the case of data) that when rated become the billing reports/SCRs. And at any rate, the contractors will still be relying on the telco’s billing systems, or at least regularly updated charging schemes and rules, to convert the raw data into accounting spreadsheets that are meaningful. Frankly, it looks like some people want to hide behind jargon to hoodwink the Ghanaian people.

7. Rather than revenue assurance, what this is most likely to be useful for is customer protection. Had the Ghanaians set this up right, then this could have been used to help subscribers who believe telcos are “stealing their data” to get independent verification and perhaps relief. In most sophisticated jurisdictions, when regulators talk about this kind of stuff that’s what usually concerns them most.

8. But if at all Ghana has to continue to running its own independent CDR re-rating and charging processes (which is what this is about) there are many off the shelf packages used in the industry for just that. Telcos charge each other for interconnect services, roaming, termination, etc., all the time. Software for doing that is available on a SAAS/hosted basis from as low as $1000 a month. Even if the Ghanaian government wants to host the solution locally in its own network control room/datacenter, one struggles to see how setup and maintenance for something like this can cost more than $150,000 a year.

So why is the Ghanaian government spending $178 million on this expense for 10 years?

Government officials in Ghana have been promoting the notion that unless they can count all the calls and measure all the kilobytes of data downloaded on the nearly two dozen or so main-tier telecom companies, they cannot gauge the revenue of these companies correctly and therefore tax them properly.

They say that unlike airline companies, fast food chains and real estate companies, telcos are particularly prone to lie, so they can’t use standard auditing techniques at the GRA (an organisation funded to the tune of $125 million by Ghanaian taxpayers every year) to make sure that they pay the right amount of tax.

It has been explained in remarks on the matter that counting calls, measuring how long they lasted, and metering the amount of internet downloads on a network is simply not sufficient to know how much revenue was made because the telecom network operators (telos) have very complex tariff arrangements.

In fact, some of the telco tariff mechanisms change constantly. So in the end, one needs more than just traffic measurement. One also need to know for each kilobyte and each second of each phone call what the telco was *billing* at that precise time. This is not exactly like counting the number of bottles of adonko bitters produced by Angel every week in order to assess excise tax, even though we don’t do that either.

It has also been explained that of the total tax paid by telcos more than 80% depend more on what costs they declare and less on the revenue they post, so the true benefits of traffic measurement, if any at all, must be focused on a small proportion of the full spectrum of telecom taxes. In fact, we can limit ourselves to Communications Services Tax (CST) and NCA Levy. Some will argue that international traffic falls within this bracket, but in fact it does not. There are complex international carrier arrangements that makes traffic monitoring less effective here too.

The long and short of it is that only about $74 million of telecom taxes a year can be *assured* primarily from monitoring traffic, provided one is willing to trust the telco’s tariff coding and rating engines. How much is spent collecting this money (“assurance” is merely something you do to help you collect what is due) is thus of very serious importance.

The Ghanaian regulatory authorities have been doing this monitoring thing for years now so it is widely appreciated that the monitoring hasn’t really uncovered much of note. Hence, it is critical to be very conscious of how much is spent on it.

In fact, the tax authorities spend money assuring and monitoring ALL tax revenue. As has been explained in previous remarks on the issue, the Ghana Revenue Authority (GRA) spends at least $125 million on their personnel, systems and capacity to ensure that the $7.5 billion they collect is the most they can get.

To collect $1.23 billion of in company tax from Ghanaian enterprises, the GRA has divisions that focus on corporate taxation, including even a “large taxpayers unit”. From my assessment, the total cost of assurance and monitoring of this $1.23 billion is about $24 million (still refining the calculus though).

In short, for every cedi collected from companies or individuals in Ghana the authorities spend less than 2 pesewas. This is still double what the UK tax authorities spend per sterling raised though, but it is what it is.

The argument that has arisen is whether the telecom industry is a) that corrupt and b) that flush with hidden cash to warrant the industry being treated as a special case and the authorities spending far more than 2 pesewas for each cedi collected.

To reemphasise, Ghana has been spending about $32 million to protect $74 million in recent times. Even if we concede the argument that international call tax can be equated to CST and add NCA levy, the total tally of relevant taxes still amount to only $200 million thereabouts. But as has already been hinted, “international terminating” traffic has systems for cross-checking that make direct monitoring ineffective. Let’s leave it there.

Should the Ghanaian tax authorities spend 40 pesewas for every hundred pesewas of telecom taxes the country raises?

The activists of the Government of the day make two arguments that deserve some consideration.

A. There is a possibility that as new services come out of this industry, more opportunities to tie the country’s tax take directly to the revenues of the telcos will arise. Thus that $74 million could grow severalfold.

B. Government has reduced the cost of monitoring, so, as a percentage of the total tax take, the country’s cost of collection will correspondingly go down.

In simple terms: it is additional money. If Ghana can raise more money than it could have done without monitoring then even if the cost of doing so is 90% of the amount raised, it is still new money.

Firstly, it is not entirely clear that the government has really saved money on the new deal for telecom revenue assurance that it has signed with KelniGVG.

Yes it has cancelled the contract of one of two companies that was doing stuff in this space – Subah. And it says it has reduced the scope of what Afriwave, the other company involved in assurance, does.

But it is a widely known fact that Afriwave has a long-term contract that entitles it to fees that still have to be paid. The “interconnect” services it is providing are also only useful if they succeed in preventing underdeclaration of revenues because otherwise the telcos would have continued to do it themselves. Indeed, the interconnect regime was foisted on the industry with this very justification. So this is another cost imposed for revenue assurance.

We also know that the government intends to continue paying $18 million a year to a new company – KelniGVG – for this assurance business. So, it is safe to say that Ghana is going to keep spending at least $30 million a year. That fact is a given. The reader can thus ignore point B above. Let’s focus on point A.

For the government to use these monitoring services to raise more money than they ordinarily would have, and thus make discussions about costs redundant, the LOGIC of how these services work need serious analysis. Because otherwise all that would be happening is the authorities taking a huge chunk of taxes raised and passing it on to a Haitian company with a Ghanaian face.

So, let’s dispel some misconceptions:

A. No, the contractors that the government of Ghana has been engaging so far DON’T actually have the capacity to directly count every call made on every network, measure how long it took, and weigh every byte of data downloaded on every network, from Blu to Globacom. Let’s throw that misguided propaganda away.

To do that directly, on the live networks as they claim they have been doing, independent of the telcos’ own systems, they would have to deploy hardware gateways into the physical network and circuit switching systems and build their own mediation hub. None of the companies Ghana has engaged so far remotely has that kind of capacity, and the costs would be humongous. In fact, if this was what was going down, the likes of Huawei, NSN, Comviva Mahindra etc would have been the names Ghanaians would have been hearing. That kind of feat is not a joke.

B. The telecoms have mediation software siting in their core network operations centers that collects the data from their switches and gateways across their network, which in turn pool data from thousands of cell sites across the country. This software receives and translates raw data into auditable logs called UDRs or EDRs or CDRs, depending on what framing of the activity is valid at a particular time. These logs are what the telcos themselves use for their own revenue analysis.

What has been happening in Ghana, especially since 2015, is that the country has been hiring companies that lack the capacity to design APIs to comprehensively interface with the elaborate telco mediation software and thus receive granular logs in lightweight format for their interpretation software. So apparently the data gets sent offline in excel format, which these contractors claim they then import into some software sitting on servers in their data centers. It is these servers that Ghanaian government officials keep calling “probes”, “machines” etc.

The current position of the government is that they intend to enable online interfacing with the mediation software of the telcos.

The question then becomes:

A. Does that make a substantial difference?

B. How much should that cost?

It can be conceded that this reduces the likelihood of errors on the part of the companies doing the parallel tabulation. So in that sense it may be an improvement.

But it still depends on the contractor relying on the telcos’ rating systems.

That is why they now say they want to take data a bit more downstream by collecting actual billing reports.

What is curious is that we are now happy to trust telcos’ billing reports when we were worried that they could “underdeclare” the more granular CDRs that they were giving for free to the telecom regulators and the tax authorities (GRA).

Be that as it may, how much should this cost if done properly?

It is simple. One just needs to look at the commercial services available for interpreting low-level telco data.

Example: WebCDR:
http://www.webcdr.com/

And SAAS solutions that do exactly the same thing, like Mahindra Comviva’s:
https://www.techmahindra.com/…/so…/Pages/Platforms/baas.aspx

These types of solutions are so generic that they are now available as open-source products and SAAS solutions with no need for the buyer to invest money upfront.

If the GRA and NCA really just want additional insight into rating and billing in order to spot anomalies, they could start with simple off the shelf CDR analytics solutions and then commission custom modules as they get better at it. And there are clever ways of spotting anomalies if one truly understands what one is looking for.

As has been said already it is primarily a matter of trained manpower in the revenue assurance teams of the GRA.

I don’t see how anyone can justify spending more than $1.5 million per year on personnel, training, and software for revenue monitoring and assurance in this context. This assertion is based on both benchmarking and direct bill of quantities modelling.

Firstly, based on the proportion of company taxes paid by telcos, Ghana should already be spending at least $10 million of the funds its taxpayers give to the GRA annually on telecom revenue assurance. The question therefore is how much more should the country sacrifice in the hope of additional revenue?

Given the track record of revenue performance in the past after the authorities have spent millions of dollars on CST monitoring, let’s assume that the most they can do is to DOUBLE the CST revenue. If so, then they should use the 2% of revenue raised as the appropriate cost benchmark. Which is how I arrive at the $1.5 million quoted above.

But knowing what I know of public procurement in these parts, I can see why such thinking is likely to pose challenges in the corridors of power.

Should the Ghanaian regulatory authorities continue to insert probes and gateways into and within the telecom network to monitor sales of the country’s mobile network operators directly because they do not trust them to disclose the right numbers and therefore pay the right amount of tax?
 
Further thinking is obviously required. But at least we need to start from data-based rational analysis.
 
Here is the starting point of any serious analysis regarding the “official paranoia” based “count traffic and tax” policy being used in the country’s telco industry:
 
Of all the taxes imposed on the Ghanaian telecom sector, the only one that is transaction based in a way that makes the principle of measuring traffic to determine revenue remotely valid is the communications service tax (CST), a top-line tax. The other top-line, and of course bottomline, taxes are not really transaction based. One needs to look at a suitable range of accounting metrics to determine the right revenue and then apply the tax.
 
The communication services tax is barely 25% of the taxes paid by just MTN, the biggest but still only one of five active network operators, though. It is about 15% of all taxes the telecom sector as a whole pays.
 
Since the country imposed PPP contractors, Subah and Afriwave, on the telco industry to police them at a cost, per the government’s own analysis, of $32 million a year, revenue from CST has actually FALLEN. From $58 million in 2016 to $54 million in 2017.
 
Tax take from the overall sector has also dropped. At any rate, probes and sensors cannot help ensure honesty in corporate tax matters, or national stabilisation levy matters, so that point was moot.
 
Does the reader actually understand the point being made? Let me repeat: Ghana has spent $32 million a year on private contractors in order to REDUCE CST (tax) revenue from $58 million to $54 million!
And yet this is the segment of telecom tax revenue that is MOST SENSITIVE to the technologies being deployed to prevent the telcos from cheating and lying. What about the 80% plus take from other taxes in the sector? That much larger proportion of tax revenue that probes and sensors in the live network cannot really reach?
 
Is this really serious policymaking?
 
I will be the first to admit that I haven’t conducted a study to gauge the honesty or dishonesty levels of the telecom industry, and I am not one to make rash assumptions. But neither has the government! No one has.
How can a country be run on base gut instincts? On groundless suspicions? Just so that officialdom can then decide to spend over $32 million a year chasing their tail (the government will say that their latest policy will reduce this amount to $17 million, but that isn’t accurate as the industry is still saddled with interconnect gateways that add no value and need to be paid for)?
 
Surely, Ghana can start with some serious studies and broad-based consultations across the industry and the research community for superior ideas about how to grow the telecom industry, leverage it and then extract even more revenue?
What am I missing?

Magical_Public_Sector_Debt_Drop_2017-2018I see that some officials of the Ghanaian government are in a celebratory mood. And who wouldn’t be? If the relative size of public debt has shrunk by nearly 15%, it sure is cause for celebration.

So I went over to the Bank of Ghana (BOG) source document to try and understand more. Only to meet confusion. The way officialdom in Ghana like to present public statistics can be a tad annoying. With no explanation for gaps in the data etc. etc. Private citizens who take an interest in public affairs are easily frustrated by this lack of annotation and poor referencing. But I trudged on.

First the total public debt numbers:

GHS 145 Billion – March 2018

GHS 142.5 Billion – December 2017

That was easy. All that was needed further then were the provisional GDP number for 2017 so that we could see the base from which the 2018 GDP estimate was being projected from. All of a sudden, trouble (see page 2 of the latest BOG summary of macroeconomic data).

According to the document, the second half of 2017 saw total GDP output of GHS 111.468 Billion (to keep things simple, all measurements are in current prices). If the outturn of the first quarter of 2017 is added, the figure becomes GHS 158.108 Billion. But where is the 2nd quarter GDP number? It couldn’t be found. I went to the BOG’s own second quarter bulletin, fast-read it, but still couldn’t find the number. Surely, a headline figure like that shouldn’t be buried under dense text!

I had to go look for the Statistical service bulletin for the second quarter of 2017. I discovered that there had been a revision of the provisional GDP figure from GHS 45.3 Billion to GHS 40.783.2 Billion for the period.

What the BOG summary does say unambiguously though is indeed that total public debt as a percentage of GDP in January of 2018 dropped to 59.5% and rose slightly to 60% in February 2018, having hit 69.8% in December 2017. I rubbed my eyes and read again. What current projected annual GDP figure is being used though?

From the calculation of private sector credit as a percentage of GDP on page 8, we can deduce that the Bank of Ghana’s estimate for GDP at current prices is GHS 241.5 Billion ($52 Billion).

If this estimate is correct then public debt as a percentage of GDP, based on the BOG’s own figures, should be 63% (i.e. $32.8 billion into $52 billion).

But based on the 2017 GDP figure of GHS 198.9 billion GHS ($45.02 billion, using the BOG’s own forex rate), computed from a mixture of GDP and Stat Service data, the economy would have to be growing by 20.7% per annum in nominal terms (to hit the projected figure of GHS 241.5 Billion) ) for public debt as a percentage of GDP to hit 63% (much less the 60% given in the document).

If it is assumed to be growing instead at 8% (and current GDP thus assumed to be about $46.36 billion), public debt as a percentage of GDP should be 70.7%.

With all this confusion, how can a public interest researcher, analyst or activist do her work of independent scrutiny of Government economic performance?

PS: This is the result of back of the envelope calculations done in half an hour, so very happy to be set straight so that I too can join the party.

The more I think about it, the more convinced I am that new technology requires us to reassess, in 21st century light, some of the seminal outputs of African historical scholarship.

We need to consider the use of novel “pattern analysis” algorithms to trace the evolution of certain interesting ideas, including some scorned in mainstream scholarship.

Case in point: the number of mainstream African historians who have dabbled in the “Afro Israelism” genre (the idea that various African ethnic groups originated from Judah/Canaan or were the “original Hebrews”). Sure, they are not that many in the larger scheme of things, but the “African migratory routes” field is a rather small one.

In Ghana this genre is most strongly associated with the “origins” of the following ethnic groups in particular: Ewe, Asante and Ga. In Nigeria, both Yoruba and Ibo chauvinists have made similar claims.  And whilst some orthodox historians may scoff, these ideas have serious resonance with many, especially Christian revivalist, Africans.

When you look at the pattern of arguments deployed, however, it doesn’t take you long at all to see that they are mostly regurgitations of established pseudo-historical “Israelisms”, many of which take a leaf from the playbook of the “lost tribes” motifs, as pioneered by Le Loyer as far back as the 16th century.

However the peculiar strain that has most entrenched in our local variant of Israelism may owe a lot to Gibsonite revisions to the core tenets of the tradition dating to the late 19th Century. You see coastal dabblers in colonial Ghana start to rev up their speculative analysis around this same period.

I strongly feel that technology-aided research would make the task of locating the twisted trajectories of many of these ideas much easier, and thus more fruitful.

 

When many people say things like: “democracy isn’t suited to African circumstances” and stuff like that, it is usually because they haven’t really thought carefully about what democracy, qua “democracy”, is meant to do.

Democracy, when carefully analysed, is not a tool for taking efficient decisions. It is not a gearbox for arriving at optimal strategies for governance. It is, instead, a set of “brakes”. It is designed to slow, tamper, and moderate. So that should bad or wicked people take over a country, their damage would be minimal and there would be a way to transfer the reins over to others peaceably. That really is all democracy promises, and in many ways it is best at this. All those who curse democracy have never proposed a better tool for doing this one thing well.

For all the other stuff of governance and development, a country needs other instruments, conditions, and cultures. We sometimes use the word, “institutions”, as a shorthand, though some then quickly abuse the word to mean “organisations”.

Institutions are best thought of as “protocols”, “logics” and “strategic intents”. That is also why they must have “specificity”. Institutions are best when they specialise.

The challenge is that some of the issues that confront a society as it develops cannot be narrowed down to a specific set of goals or even agenda. They seem pervasive. They seem to concern the very ethos and mindset of the people generally. And these kinds of issues therefore transcend institutions.

Some of these “issues” include complex notions such as “democratic trust”, how people come to accept certain rules of equity as indeed “agreed to” even when they don’t fully understand them; and the even more nebulous idea of “intellectual climate”, how we summarise the quality of ideas that set the benchmark for how people think.

The current situation in the Ghanaian “telecoms” sector concerns these two issues: democratic trust and intellectual climate. I will explain briefly. The technical details will be very simplistic, for brevity and clarity sake; bear with me.

We have in place now a kind of “telecoms landscape” that is roughly segmented into three broad, crude, domains:

Content (voice and data)
Services (electronic banking, mobile money, geolocation etc.)
Governance (rules, protocols, standards, accounting etc.)

In all these domains, there are again two broad segments: domestic and international (you can also look at distinctions such as “consumer”, “enterprise” etc, but for this analysis that isn’t necessary).

With this crude background in place, let me explain the “problem”.

Telecom companies carry content from their customers and charge them “transportation fees” or even take a cut of the revenue. They also generate some of this content, and sell to their customers. They also facilitate actual services and charge the service provider a fee. And they produce their own services and sell directly to customers. They may do all this domestically. But occasionally they serve as importers, clearance agents, or export agents. In short, one can look at their business in very similar terms as one would any other business. Sometimes, they are like one of those big fuel transport companies. At other times, they are like TV3, Multimedia or Omnimedia.

The thing is this can breed complexity. Which makes it hard for perfectly fitting analogies to be used. And that in turn means that most people shy away from applying common sense principles to evaluate what happens in the sector. This is a common challenge in democracy. Citizens simply do not have the time to break things up into bite-size chunks, compelling them to “delegate their thinking” to others. This works fine so long as some grand principle of “democratic trust” is active.

The second problem is that political decision makers are not always immune to this same “time-constrained understanding” problem. Just that the illusions of “delegated thinking” prevent them from admitting this. Very often, issues have so many layers that decision makers get lost, and they too have to “delegate their thinking”. They rely on consultants, and “experts” both in the private and public sectors. This should work alright so long as the “intellectual climate” is favourable. That is to say, so long as it is fashionable for hard-thinking and quality ideas to be valued, prized, and rewarded.

When both democratic trust and the intellectual climate suffer a downturn, pandemonium results.

Firstly, we decided that content coming from abroad needed to have a tariff, not very different from how we tax material goods.

Even though this content is clearly “digital” in character. This is akin to saying that making a call from Takoradi to Accra need to reflect the distance, because that is the case when transporting oranges from Tekyiman to Kumasi.

Soon, we began to have doubts about the “shipping companies” who bring the digital goods from abroad. So we went and hired companies like GVG and “delegated the thinking to them” about how to solve the problem. Because digital goods are not like physical goods however, people continued to bypass the gatekeeper we had hired.

So we invented a new problem called “simbox fraud”, and hired Subah to prevent people from bypassing the gatekeepers.

Then we said that SIMbox fraud koraa it is not really about tax revenue per se but about manning the “customs posts” of digital imports and since this is digital importation we are talking about and not physical imports, GRA shouldn’t be calling the shots, it should be the NCA.

So we went and brought Afriwave to come and monitor the “customs posts” through which all digital goods should flow into Ghana. When it was pointed out that there is a huge sea not just around Ghana but also “inside” Ghana called the “internet” so this has nothing to do with manning “customs posts” as the SIMboxers can always “smuggle” the content through any of the numerous inlets and estuaries, we remembered that smuggling is dealt with by the Police. Subah immediately entered into a relationship with the CID and jumped back into the picture.

Then we remembered that this distrust problem wasn’t limited to “imported digital goods”, it also affects domestically produced digital goods. So we asked Afriwave to also start monitoring the domestic trade.

They should build guardposts in between each major telecom company so that digital content passes through them from one network to the other. When it was pointed out that most of the digital goods are consumed within the same network within which they are produced, we changed tact and insisted that even those goods should be tracked, regardless of where they originate or may be going.

Then some smartass quickly saw a loophole. How can Afriwave carry digital goods between the telcos and also be responsible for counting the goods? How? We snapped our fingers, and said, “shegey!”

Then we went back to GVG. But this time GVG, knowing how fickle we are, was happy to partner with Kelni, a “majority owned Ghanaian company”, giving us: KelniGVG.

Subah was then kicked out. So here we are now:

Afriwave takes content generated by MTN customers and pass it on to Vodafone. Then they take content generated by Airtel-Tigo customers and pass it on to Glo. As they do this, KelniGVG tags along, counting every good and fastidiously recording it in the book of judgment.

Then we looked on our handiwork, and we said, “it is good”. And our work was marvelous in our own sight. So we said, but what about the services? Sorry? I mean if they are lying about the goods, surely they can lie about the services too, right? Of course! So we asked GHIPSS to come and be doing.

For electronic money to move from Airtel-Tigo to Vodafone, it has to go through GHIPSS. And to ensure that no one is lying, including the government-owned entity, GHIPSS, KelniGVG will be following every transaction, counting it pesewa by pesewa, dama, simpoa, just like that.

If this is still a little bit overwhelming for you, it is like saying that the only way to trust Papaye to pay the correct amount of tax is to hire people to stand there and count every plate of rice and chicken sold. And the only way to trust Nyaho Clinic to pay the right tax is to sit there and count every patient they operate on. But we are where we are.

What about the people who actually invented most of this stuff that we are copying? Britain, America, South Korea, Germany etc? Why are they allowing “standards bodies” and “industry associations” to build systems for interconnection and interconnectivity? Don’t they know that these telecom companies, unlike say chocolate companies and pharma companies, are congenital liars? How can they trust their standard tax regimes to work when we are talking about digital goods and services here?

And why are they more focused on creating ICT companies that generate truly novel innovations instead of those that make their money counting digital goods and inspecting other people’s services, the majority of which are imported anyway?

If you think carefully before you respond, you would conclude that “democratic trust” and the “quality of ideas” are at play.

I love all my West African friends pondering on the recent events in Windsor and then going on some wakandian history binge, like: “they had a traditional wedding, so why can’t we stick to ours too?”

Great. We should. But not because of them. Because, in actual fact, they didn’t really go “traditional”.

This was not how the pre-Christian Celts, Pitts, “Saxons, and the other lots, in Britain married.

Heard of “handfasting”? Exchange of ancestral swords? Piercing the horn? Taking an extra bath in the year? Honey meld? Yeah, those were the real “traditional” wedding rites in Britain before they got christianised.

In fact, even many centuries after becoming Christian they used to follow the two-tier approach that should be familiar to most Africans.

The Groom-to-be would visit the family of the bride and pay three types of dowry (it wasn’t a joke). They will thereafter have the handfasting fun and “jumping the fence” and all ’em “traditional” rites. Then later they will do the church wedding.

Until some plucky, probably foreign monk, in the 12th Century declared some of the dowry and “family-consent” practices pagan. Then in the 16th Century, Canon Law caught up with the Council of Trent and tightened the marriage rites thing further.

Now that Christianity is on the wane, and the vestiges of Roman and Norman colonisation are being stripped away to reveal Britain’s “true native culture”, some of the “pagan” stuff is coming back.

Yep. It isn’t only Africa that has a “woke history” burden.

The World Bank has just released its 2017 Private Participation in Infrastructure Report.

Here are some key findings pertaining to Sub-Saharan Africa (SSA).

Only the SSA region saw “declining investment” by private sector actors into public infrastructure. 2017 recorded the second lowest level of private participation in SSA over the last decade.

Indonesia alone received nearly EIGHT TIMES as much private investment into large scale infrastructure projects as the whole of SS Africa combined!

Whilst Ghana and Rwanda are frontrunners in 2017, it is important to note that the pledges of investment in the case of Ghana are somewhat shaky. Analysts would recall that in 2016 pledges of $2.05 billion for the Tema Port expansion and the Amandi Power Plant couldn’t materialise in 2017 due to ongoing structuring difficulties. The $550 million pledged for the Tema LNG Terminal, which is the basis of the country’s strong performance in the 2017 World Bank PPI report, is likewise mired in administrative delays. Legal and commercial structuring continue to be a major challenge for many Public-Private Partnership (PPP) projects in Africa, generating expensive and distracting legal disputes by the hundreds.

Another insight that is also relevant for the points I intend to make in this brief note is the continued decline of government contribution to PPP ICT projects. In the last five years only one-third of large-scale ICT infrastructure projects received government support.

On the whole, private participation in infrastructure (PPI) projects, especially in SS Africa, continue to be critical. PPI drives foreign investment, which ensures the availability of resources to invest in the first place in Africa’s many cash-crunched economies. PPIs can also bring top-notch expertise and project management capacity simply not available locally.

But that is far from saying that PPI or PPP activity by themselves necessarily produce these benefits. It depends entirely on the principles and strategic logic governing the specific PPI/PPP activity. Let me illustrate this point with a case study from Ghana, in the ICT infrastructure area.

When the Bank of Ghana called for restricted bids in 2016 for a “retail payment system infrastructure”, it was clear from the context that the winner of the tender was going to be working on mobile money interoperability. The Central Bank’s commercial subsidiary, GHIPSS, had already been working on the other components of the system, such as RTGS and ACH. The missing piece therefore was connecting the mobile money platforms of the telcos to the GHIPSS infrastructure. Mobile Money interoperability (the ability of a Mobile Money – MoMo – subscriber on one mobile/telecom network to send funds directly to the wallet of a subscriber on another network) is believed by experts to be essential to the financial inclusion agenda. Interoperability however requires that all telecom networks in the territory accede to a joint protocol for managing settlement, disputes, and sharing of fees (if any) etc. The process requires technical capacity, the procurement of which can imply some costs.

The Bank of Ghana (BOG) decided that the project shouldn’t be paid for from public funds. A private investor should foot the bill and then recover the funds from the mobile money “industry”, in essence from the telecom networks that provide MoMo services in Ghana.

All well and good. However, alarm bells should have rung immediately the BOG saw the bids of the three companies they invited to the restricted tender. They claim that they emailed two other companies to submit tenders but the two didn’t respond. As for why the BOG simply didn’t publish an open tender, no one has so far provided a cogent reason.

One company said the job could be done for $3.2 million. Another said they could do it for $1.2 million. The third, an obscure integrator called Sibton, said it would cost $1.1 BILLION, but that they would raise the needed funds themselves and recover through levies charged to the industry.

The Bank of Ghana, making reference to its Request for Proposals, immediately disqualified the first two companies on the ground that those companies had asked the Central Bank to invest in various aspects of the project, and the Bank had made it clear in its RFP that it did not want any financial exposure.

But if indeed this was the BOG’s attitude, why was it getting involved in choosing a monopoly provider to foist a system on the mobile networks in the first place? If all it wanted was a “facilitation” role, then it could have simply followed precedent around the continent by convening the mobile networks and strongly encouraged them to undertake the interconnections and integrations themselves, as indeed they do for voice calls and other similar services. A number of SS African countries such as Madagascar, Kenya, and Tanzania, had indeed already gone this route.

Looking at the ridiculous gap between the costs quoted by the first two companies and Sibton, did it not occur to the BOG that the cost of interoperability was not that high and therefore that there was something completely off about the Sibton deal?

Anyway, insisting that the contract sum is ZERO, it awarded an exclusive contract to Sibton, authorising the company to spend $1.1 billion (per Sibton’s own preferred exchange rate) to build the interoperability switch and recoup the investment through a revenue sharearrangement with the mobile networks.

The BOG did not bother to establish the capacity of the company to raise this massive amount of money.

Even though the company had stated that it will spend $400 million on electricity and water and $92 million on insurance, no alarm bells rang. Even though no financial institution had committed to the project, the BOG saw nothing problematic. In fact, the BOG consented to an agreement whereby the financial proposals made by Sibton in its tender submission were incorporated by reference, verbatim, as commercial terms. This meant that Sibton was guaranteed to recoup the $1.1 billion plus a reasonable return on investment. Sibton had not been coy about the mean of this recoupment: a levy on mobile money operators.

How much was Sibton hoping to squeeze out of mobile money? An average of $40 million a year for the first 5 years. It was then to escalate this amount such that over the life of the contract (15 years in the first instance, and a further 10-year extension at its discretion) it would make back $1.1 billion plus profits. In fact, the contract was drafted in a manner that allows Sibton to adjust the revenue share amount (called “tariff” in the agreement) to ensure what its mouthy lawyers call “financial equilibrium”.

That point is critical to understanding the logic of this PPP: the contract and the financial proposal (which, as you might recall, had been incorporated into the contract by reference) were emphatic that Sibton shall spend $1.1 billion on the project (though no mechanism was provided to verify how much it actually spends). It must then make enough money from charging the mobile money operators until it has recovered the $1.1 billion and made a reasonable return on its investment, beginning with revenues of $200 million in the first 5 years.

The weirdest problem with this bizarre arrangement is obviously that it takes away all the risks away from the private operator since they are guaranteed that fees shall continuously adjust to ensure that come what may they will recover their investment plus profit. Meanwhile, the said investment had been pegged at a level that is at best several hundred times the cost of what the networks themselves would spend in skilled labour if they were to handle the interconnections themselves.

To understand the sheer monstrosity of the scheme, consider this.

The most profitable telecom company in Ghana is MTN. In its most recent financial disclosure, it revealed a profit figure of about $53 million. If we consider that the profit margins on its mobile money product is similar to its other products, then its profits from mobile money was a measly $7.2 million. But let’s even follow the crowd and assume that mobile money is wildly profitable in Africa. Let’s assume that rather than the 7% margin it makes on its general business, it makes 30% on mobile money. This will still imply a profit of only $31 million per annum on mobile money.

Now here is the meat. MTN in Ghana, according to the latest figures this author has seen, has nearly 90% of mobile money accounts and 92% of deposits! So practically, it makes most of the profits in this nascent industry. It is safe to say that the entire profit outturn in the “mobile money industry” in Ghana (on a 30% profit margin assumption) is not more than $40 million per annum.

For the Sibton deal to have worked, therefore, virtually all the profits in the industry would have had to be whittled away to satisfy a contractor providing very little value in the ecosystem. Or, more likely, the mobile network operators would simply have passed on the costs to the mobile money subscribers.

A PPP/PPI approach to managing MoMo interoperability in Ghana, in the way that the authorities designed it, would thus have cost more and delivered far less to consumers and the industry. Thankfully, there has been a change of guard at the financial helm in Ghana. A decision was taken to continue with the regulator-led approach by implementing a mediating switch (rather than allow the telecom networks to implement multiple, bilateral, interconnections as is the case elsewhere). However the design and construction of the switch has been awarded to the same subsidiary of the Bank of Ghana already managing other aspects of financial sector interoperability, GHIPSS. The cost will be less than $4.5 million upon completion, and already phase one of the effort (allowing wallet to wallet transfers) has been completed.

It is clear, even from this brief case study, that PPP/PPI models of infrastructural transformation in Africa shall offer scant relief to a continent reeling from heavy underinvestment unless serious attention is paid to how risks and rewards are shared between the public and private sectors, with a view to ensuring sound governance and administrative propriety and integrity.

Take a look at the non-performing loans trendline below (Source: Bank of Ghana).
 
Since 1989 when the Ghanaian banking authorities introduced the use of “minimum paid up capital” as a major instrument of quality control in the banking system, the only direction has been “up”. From $740,000 in 1989, and $7 million in 2008, we have now arrived at $90 million plus in 2018.
 
Whilst we are not arguing an absolute correlation, the fact remains that over the last decade and half, more important quality indicators of bank performance, such as capital adequacy ratio and non-performing loans, have actually deteriorated. Just look at the Bank of Ghana’s own graphs annexed below this short note. This deterioration has happened even as the Bank continues on this obsessive drive to promote super-high minimum paid-up capital, a variable considered relatively insignificant in most sophisticated banking jurisdictions around the world.
 
Since 2012, successive Bank of Ghana (BoG) governors have made the same argument when raising the capital floor: we want strong banks that can finance “big ticket” transactions. What happened to “syndication”? To “risk pooling”? Every year we go to Europe for $1 billion plus of loans and facilities to finance cocoa purchases. Each time, several European and other international banks pool capital to lend to us, even though each of the major banks that participate can probably finance our entire national budget on their own.
 
We don’t need every single bank in Ghana to be able to finance a $50 million road on their own. Right now, that is not what happens anyway. Big deals are syndicated. We want more of that. And we want more attention paid also to the $250k to $2.5 million deals that non-bank finance institutions aren’t always able to handle, and which medium-sized and specialised banks are best placed to handle.
 
Arbitrary capital floors are certainly easy to impose. But they do little to cure the deep rot festering within the banking system. When last we pushed the minimum capital requirement from a little over $25 million to more than $50 million, it did little to enhance the health of the financial system. So, few years later, what do we see? As much as 40% of loans extended by banks to the agro sector risk default. A quarter of all loans to the manufacturing sector cannot be paid back. In these critical sectors, Ghana has one of the riskiest credit environments in the world.
 
The truth of the matter is that the aggressive use of the minimum capital requirement as a key instrument in regulating banking quality in this country has not proven effective over the last two decades. The reason is simple: this blunt tool is not the right surgical instrument for dealing with the delicate problems facing the sector.
 
The minimum capital tool’s use in South-East Asia following the Asian Financial Crisis, which influenced some countries in the region to jack minimum requirements to a billion dollars and more, was in the context of very special circumstances. Circumstances whereby international speculators and purveyors of hot money were threatening to bring entire regional financial systems down.
 
A medicine for managing acute crises cannot be prescribed to deal with chronic problems, like the deteriorating capital adequacy and NPL situations we face. Nor is it likely to fix the fundamental challenge of the high cost of credit, which is the bane, not just of the financial system, but of the economy itself. In fact, by raising the cost of doing business for the smaller banks, this blunt capital jackup measure is likely to exacerbate that problem. And what about the 800-pound gorilla that is asset risk-weighting?
 
It is fast becoming obvious, following the Unibank debacle, that a more urgent task confronting the BoG is to completely overhaul the entire framework for assigning risk weights to the off – balance sheet exposures of banks in this country, and to do so in a way that can provide some sort of early warning signal of potential distress.
 
Most of the Basel (BIS) and IMF prescriptions in this regard require considerable adjustment to work in our context, where “sovereign” doesn’t mean what it does elsewhere (our governments often have worse borrowing habits than some addicts) and “public sector entities” don’t have the cachet they are granted by convention. The weak credit referencing system also makes corporate debt rating a virtual crapshoot. It has always been a source of fascination for observers how preferential risk weights and maturity treatments affect capital adequacy measurements in Ghana considering the thinness of regulatory reporting in this country.
 
If capital hungry Dubai and fabulously rich Abu Dhabi, the crown jewels of the UAE, can both make do with a $14 million minimum paid-up capital requirement for their banks, without fear of eroding capacity to finance, then I am pretty sure that Ghana can manage too.
 
Not too long ago, we were all over Mauritius, trying to cosy up to their leaders in the hope of benefiting from the experience of their financial services success story. We even wanted them to come and set up an “International Financial Services Center” here. Yet, this Indian Ocean country maintains a $6 million capital floor.
 
It must be obvious to the Great and Good who run this country that managing a healthy financial system and insisting on a $90 million plus capital floor can be mutually exclusive propositions.
 

In the tussle over what Ghanaians should call their high seat of government – Flagstaff House or Jubilee House – we have seen the replay of an old drama: history-baiting.

It recalls the fight over the country’s first Presidet’s decision to relocate his personal residence to Fort Christiansborg (the property rechristened as “Osu Castle”). The Opposition at the time denounced the action, believing it to represent a symbolic move to show that Kwame Nkrumah had finally stepped into the shoes of the departed colonial overlords. Later, stories would circulate that the castle was haunted, and its occupants were enduring sleepless nights from the howls and moans of the ghosts of desecrated slaves.

In 2005, the matter sprung up again. This time over a decision by the Government of the day to borrow $50 million from the Indians to construct a new, “more befitting”, presidential palace to replace the Osu Castle, and thereby mark a symbolic close to a sordid colonial chapter. The Opposition stormed out of Parliament in protest.

There is indeed a general sense that the “forts and castles” dotting the country’s coasts (the 40 or so remnants that remain in Ghana represent the largest concentration of European fortifications in Africa) are haunted by the savage humiliations of our past. That they are merely a scar of European subjugation, and their only utility now lies in serving as a constant reminder of the brutality of a bygone era.

But what if things are more nuanced, as true history usually is? What if these structures instead represent a towering monument to the collective Ghanaian disinterest in the complexity of the country’s history? Ghanaians’ sheer lack of familiarity with the important details of how the society has traveled to where it is now on the 500 year-old road of intercourse with the Europeans?

I am provoked to ask because of a niggling confusion I have endured for many, many, years. It is simply this: the major castles that have come to dominate our consciousness are architectural oddities.

Their emergence is said to have begun in the High Renaissance period with the building of the fortification which would later come to be known as “Elmina Castle”. Yet the structures jarringly fail to resemble any of the forms of castellation derived from the European traditions of the period and the succeeding epochs when they were built.

Take Christiansborg, for instance. Take a careful look at the picture of Christiansborg attached. It is usually said to have been constructed by the Danes in the year that Frederick III declared himself absolute Monarch of Denmark (1661). And yet it bears the monogram of Christian VII, the troubled Danish King who ruled from 1767 until his death in 1808 (“ruled” being a euphemism, as he spent most of his days drugged). Why is that?

The truth is that there really DOESN’T EXIST *ONE CHRISTIANSBORG* castle.

What we call Christiansborg castle has a past shrouded in some mystery. It is more accurately dated to 1640, when the Portuguese are said to have constructed a battlement at its current location after they had been dispossessed of encampments elsewhere. But as historian Walton Claridge modestly acknowledges: “important forts or castles are
suddenly mentioned as being in existence at Christiansborg and Cape Coast, but of their origin next to nothing is known”.

The record does show that the Swedes were in possession of this fortified base in 1645, and seem to have held it until a turncoat called Carlof secured a commission from Frederick III in 1657 – a few years before this strong-willed Danish monarch disbanded his Parliament and tore apart his country’s version of the Magna Carta – to seize Swedish possessions on the Gold Coast, following the defeat of Frederick’s forces by the Swedes in the European theater.

The Danish conquest of this Swedish fort – Ursu Lodge – and subsequent enhancements to its battlements began a process of permanent association of the structure with Danish design. Never mind that it changed hands numerous times ((including at one point to the shrewd Akwamu Chieftain, Asamaning), and most times the different powers made extensions, modifications, and renovations to its essential design.

In short, like so many of the European forts and “castles” in Ghana, Christiansborg is an architectural mongrel. Its design is “local”, in the sense that it reflects unique historical and geographical conditions prevailing in historical Ghana over a long period of time. It has literally “grown” in this soil. And though heinous crimes did occur in them, that alone does not make them totally alien impositions on our landscape.

It is not too hard to see that most of the European forts that remain show the same mongrelised features, as if pandering to the whims of some lost architectural school. How much of this character was influenced by native builders and artisans though? We know that with the exception of Elmina Castle (the Fort of St. George of the Mine), there are no significant records of pre-fabricated structures having been brought to build most of these structures. A good deal of the stonemasonry happened locally. Was the foremanship entirely European over the many centuries that these structures evolved, given how much they have evolved, and how eclectic their features are?

We know from European imperialistic experiences elsewhere that native artisanship is usually crucial in erecting these stone structures. The common anti-period and anti-style feel and look of the European fortifications that remain on our shores, despite the hundreds of years and divergent national origins that separate them, are made all the more peculiar by the consistency of the “mongrel” method that generated them.

One merely has to contrast this emergent motif with the Renaissance forts we find in Europe (see pictures), and even those constructed in other spheres of imperialism for the same rough and dirty purposes for which those here were apparently constructed (see the attached pictures). And one can only conclude that these structures are unique creations of our own soil, bearing in their rugged veins the clots and fluids of many stories of contest and intercourse, in some of which we were more, far more, than merely victims and bystanders.

Or, maybe, it is simply that History is not so easily appropriated for simplistic political narratives.