In December 2015, a Norwegian newspaper published an article accusing the Ghanaian government of having signed a $510 million deal with a company called Ameri, whose CEO was a fugitive from justice in Norway.

The newspaper had solicited expert opinion on the deal and been categorically told that the transaction amount had been bloated to the tune of $290 million.

Whilst the Ameri deal had been noted in Ghanaian policy circles, few people had given it a second look. Ghana’s independent “policy observers” community is a tiny and highly under-resourced one. For every weird action taken by politicians that attract their attention, at least five hundred go unnoticed. Most of the activists and commentators in the organised civil society movement hold more than two jobs, and many do this work on a purely voluntary basis. So, the Ameri deal would most certainly have generated no controversy had the company not hired a shady CEO with ties to the Pakistani Mafia.

The report catapulted the Ameri matter to the front tray of IMANI’s crowded desk, and I personally took a lot of interest in it. I volunteer time as a strategic advisor at IMANI, and was previously a full-time executive.

Upon further scrutiny, it emerged that the deal was a Build-Operate-Transfer arrangement, so the $220 million price ticket of the power plant had to take into account the cost of financing. But this cost was certainly not $290 million!

Further probing showed that Ghana had been in discussions with APR energy, a respected key distributor for the manufacturers of the power plant, General Electric (GE). Indeed, all the technical documentation for the Ameri deal still bore the insignia of APR.

The question was why did Ghana start with APR, which has done several leasing and hire-purchase transactions around the world, and then suddenly decided that it needed a strange, obscure, middle man? Especially when similar deals driven directly by APR and GE were hundreds of millions of dollars cheaper than what Ameri was offering?

The argument that Ghana had no money to buy the plant upfront wasn’t sensible since the country was committing to pay more than $8 million a month and was, furthermore, also issuing, as collateral, a fat bank guarantee of $51 million (for a plant worth less than $220 million). Both the manufacturer and their principal distributors would have done a deal at a heartbeat.

Eventually the Ghanaian government opted for a deal where GE handed the power plant to APR, which in turn passed it over to Metka, a Greek company, which in turn assigned the job to PPR, its Turkish subsidiary, structured as a special purpose vehicle conveniently domiciled outside the EU.

This circuitous arrangement now in place, Ameri could sign a brokerage agreement with Ghana, immediately assign the contract to PPR, and pocket a cool $150 million (Metka had done all the engineering, and arranged all the financing to sort out APR).

IMANI’s position was that this was a preposterous arrangement and, further, that the government should do everything to claw back a good chunk of the $150 million. IMANI reviewed large amounts of data in technical reference databases and spoke to experts to double-check the Bill of Quantities provided in the Ameri contract and found massive inflation, obviously done to hide the $150 million brokerage fee.

It was obvious that Ghana didn’t have to pay any brokerage fee as the country was putting down more than $100 million a year, a fat bank guarantee, and was willing to buy its own fuel and mineral water, and provide free siting, for the power plant. GE or APR were completely willing to deal directly with the Ghanaian government, and had indeed been in detailed discussions in the period preceding the Ameri contract. Consequently, in IMANI’s view, the $150 million sweetheart agency fee needed a haircut.

Why did IMANI not recommend an abrogation of the contract? Simple: the agreement had been drafted with some of the most ironclad clauses known to man. Every eventuality had been foreseen. No way could the contract be cancelled without Ghana suffering massive penalties.

When the new Government came into office, it commissioned an expert report which concluded in the same manner that IMANI had: the agency fee was unjustifiable. The committee advised that the contract be terminated on the basis of fraud. I took to Facebook to point out that where international arbitration was the agreed dispute resolution process, even fraud is not enough to vitiate a contract without resorting to the arbitration clause in the agreement.

On Facebook, I campaigned for the government to withhold the monthly payments as a way to force Ameri to come back to the table for renegotiation.

We are aware that monthly payments were indeed suspended for a time as the Government sought legal advice from both the country’s Attorney General (AG) and its UK based solicitors regarding the legality of this tactic.

This week, the Attorney General’s opinion found its way into the Ghanaian press and then promptly, and seriously, misrepresented by hacks of the politicians that sponsored the deal. This post is to set the record straight.

It is important to note that separate from this opinion, the Government of Ghana has also solicited a second opinion on the matter. I have it on confidence that Ms. Vicki Bright, a Ghanaian Barrister, also issued an opinion. Unfortunately, I came across this document overseas in another context and I am not at liberty to share the content here, except in very broad terms.

Regarding the AG’s opinion, here is the low-down:

1. The Attorney General of Ghana has merely reinforced what we have all known from the beginning: the Ameri contract is NOT amenable to abrogation without massive financial damage. It is watertight. It was written to survive adversity. By persons very skilled at that craft.

2. Since the agreement only allows monthly payments to be withheld if Ameri’s agents (Metka/PPR) fail to deliver the power plant and keep it running with our fuel and facilities, there are no grounds to suspend monthly payments. Whether the price has been bloated or not, the plant is working. Full stop.

3. Whilst the Government of the day failed to follow due process when entering into the sole-sourcing arrangement for the delivery of the power plant, the procurement law has a loophole to cover this: the government can assert a national crisis and use that excuse. The electricity crisis then raging in Ghana was thus the perfect cover. Whether or not the emergency plant still took more than a year to show up, which indeed it did, is immaterial. At the time of the sole sourcing there were rolling blackouts across the country.

4. Furthermore, after having entered into the sole-sourcing contract, the Ministry wrote to the Procurement Authority, which pliantly, as institutions in Ghana are wont to do, blessed the prior impropriety.

5. Ameri had very cleverly hired a law firm in very fine standing with the Government of the day, Messrs Kwame Akuffo & Co. The well-known Principal of this law firm sits on the board of critical state institutions charged with the regulation of the downstream energy sector. In fact, the President of the Republic, the AG, the Chief Justice, and many prominent ruling elite grandees are alumni of an affiliate firm, Akufo-Addo, Prempeh & Co, where this Principal has practiced for many years. The firm is versed in regulatory matters. This law firm had already written to the Attorney General to threaten all manner of penalties against Ghana should payments continue to be withheld.

6. The AG’s legal opinion then goes further to lament what we all know about the agreement. Even after payments had commenced after legal close, the $51 million standby letter of credit (“bank guarantee”) was crazily allowed to remain operative. The absence of a proper power purchase agreement overwhelmingly tilts all the advantages to Ameri’s side.

7. Whilst the agreement signed is obviously very unfavourable to Government of Ghana, merely saying it is unconscionable does not provide a basis to wiggle out of it. In the eyes of the law, it is the same Ghanaian Government (notwithstanding a change of administration) that with its eyes wide open entered into the agreement. It knew it was unfavourable when it signed it. The government has never disputed any of Ameri’s invoices, and had indeed commenced some payments in 2016. It cannot all of a sudden scream “abuse!” and back out of its legal obligations.

8. Despite loud protests against the agreement, the Executive and Parliament both with their eyes wide open consented to an agreement that was clearly known to have excessive penalty clauses and exorbitant terms.

9. That the $150 million agency fee is not merited because Ameri had done no work is neither here nor there since the Government of Ghana ought to have known this fact when its agents freely, and being a government, in a superior bargaining position, consented to sign off that amount to Ameri.

10. The agreement does not allow the arbitral proceedings, should the government elect to enter arbitration, to happen in Ghana; they must take place in London. Government has the option to assert that there is fraud and corruption, but it will still have to go to arbitration subsequent to any move to terminate. Government also has the liberty to continue attempts to renegotiate the agreement.

So, as anyone with basic comprehension skills can attest, at no point in the opinion does the AG say that the agreement was sound, clean or good. It agrees that it is a one-sided and unfavourable agreement. But this was a legal opinion. It was not an opinion on the moral quality of the contract or the transaction. And as far as the law is concerned, a person, as well as a government, is free to enter into a one-sided agreement.

How the media could translate this to mean that the agreement or the transaction has been given a clean bill of health seriously baffles me. I won’t be surprised if the opinion wasn’t even read at all by the editors that signed off on those stories.

At any rate, the opinion offers nothing that wasn’t widely known already.

The decision to brave the risks of refusing to make monthly payments to Ameri, whilst still refusing Ameri access to the facility to shut it down per the penalty terms of the agreement, is a political one, not a legal one. That decision would have been very much the government’s prerogative prior to seeking legal advice, a course of action that is clearly naive. At this point it would not be wise to flagrantly ignore the government’s own legal adviser. What exactly was the Government expecting the Attorney General to say: flout the agreement and don’t pay? This is not the type of act for which one must seek legal blessing.

Going forward, the government of Ghana needs to tell its citizens the steps it is taking to prevent such poor and completely unconscionable agreements from being signed in the future. Ghanaian policy observers are now vigilant to the modus operandi:

A. Write to the Public Procurement Authority for blessing.
B. Sometimes, even secure parliamentary ratification of the transaction.
C. Put in place a watertight contract, with outsized penalties if Ghana tries to terminate.
D. Inflate your way to millions.

How does Ghana stop these kinds of situations from arising in the future?

As far as compelling Ameri to return to the negotiating table for that haircut is concerned, IMANI continues to maintain that it has always strictly been a matter of political tactics. No legal maneuver is readily available. Particularly as the government is in fact torn between two competing legal opinions, one of which I cannot discuss here.

The people of Ghana deserve a proper explanation from their Government about the status of this sad episode in their national life.

There is a very important reason why “think tank/policy activism” is completely different from academic work or academic thought leadership.

Academic work is about steadily making incremental, highly specialised, additions to the stock of knowledge, usually through peer-reviewed work. It is rigorous and tough. But it cannot respond rapidly to the fast paced policy environment.

More importantly, one cannot effectively critique any policy from just one academic specialisation. It is not practical. A multidisciplinary team can do it, but the costs will be very high, and societies like Ghana haven’t decided yet to support policy activism.

That means the only kind of policy activism that works in a place like Ghana must be driven by “well informed generalists”. In fact, because the policy space is highly contested, specialists can more easily be coopted or silenced. So one must be an activist first and a policy enthusiast second to be effective.

Another, more fascinating, reason why generalists make for more effective policy activists is the “crazy novelty” of policy problems.

Here is a tip a decade and half in this policy activism space has taught me: when an unfamiliar problem that is poorly covered in academic research, such as telecom tax assurance, pops up to confuse you, look for “equivalent domains” and take ideas from there and quickly apply them.

This also, of course, requires one to be comfortable about being an unabashed generalist. That is why in policy activism, rigour is not everything. As oldtime World Bank policy promoter, Kafu Kofi Tsikata​, puts it: ‘”rigorous enough” is fine. Speed and impact are just as critical.”‘ (Paraphrasing).

I like examples. So let me illustrate. One quick way to convince yourself that there is something messed up about how much the Ghanaian State is spending in telco tax assurance is to look at the oil and gas industry, where production monitoring does have a very important role because governments usually own a share of the oil and gas produced (i.e. direct, live, monitoring is not only for tax purposes).

Then ask yourself: how much does Ghana make from oil and gas annually?

How does the State monitor production?

What systems does the State deploy to monitor production?

At what cost?

How does that compare to what is being done in the telecom sector.

Of course, one has to be fairly familiar with the oil and gas sector to be able to run this quick comparison. But that is the whole point of policy activism (in that regard, it is remarkably similar to “management consulting”, where consultants often have to get up to speed with unfamiliar disciplinary areas within a few weeks or even less). The trick is to have a reliable and expanding rucksack of methods and analytical tools that can be rapidly used to gather critical data and extract sufficient meaning from it, adding context through pattern analysis developed throughout a career of intellectual exploration.

Let us actually try and answer the questions above so that I can advance the point.

A. Ultrasonic flowmeters and remote observation centers are often used to monitor oil and gas production, storage and distribution.

B. A good example of such solutions is ABB’s ProcessMaster (not just the flowmeter, but the vendor’s recommended end-to-end system) and Haliburton’s DecisionSpace. Lesser known systems include PetroDaq.

C. A full solution covering the scale of oil and gas fields in Ghana can be commissioned, complete with a remote mount transmitter and observation deck, for about $450,000. Since the Ghanaian authorities tend to focus only on export terminals, I reckon two sets of monitoring systems for the two FPSOs (seaborne oil and gas production and handling terminals) would cost about $200,000, but let’s be prudent and pad the costs. Let’s even say $1 million.

D. The Ghanaian State made about $550 million last year from oil revenue.

E. This means the “additional” (beyond normal GRA assurance) cost of monitoring and assuring oil and gas revenue was 18 pesewas (4 cents) for every 100 GHS ($22) collected. Now consider what the same state has been spending on Communications Services Tax monitoring so far: 24 GHS ($5.3) out of every 100 GHS ($22) collected!

As soon as you see that as a Policy activist, you start to smell blood. Of course these are two widely different industries. But it gives you a rough starting point when deciding to pursue or ignore. You see how generalism works in this context?

Regardless what perceptions one may have about generalist policy activists who seem to flit from discipline to discipline, the fact is policy activism cannot be done from a specialist standpoint. At least, not with the resources available in a place like Ghana.

Yes, you will find a lot of ignorance parading as sophistication on this matter, but just observe how academics and other specialists in Africa find it difficult to engage with policy, and draw your own conclusions.

We can have generalist policy activists or we can have nothing. Simple.

Nii_Tettey_Tax_Revenue_Assurance_Facebook_Ntetax_06_2018

A controversy has been raging in Ghana in recent weeks: the country’s Ministry of Communications says it doesn’t trust the tax declarations of the telecom network operators and want a way to independently gauge their traffic and consequent revenue.

This is despite the fact that the telecom companies pay at least 35% of all corporate tax in Ghana, despite the share of telecommunications in GDP being less than 3%. Anyway, the government passed a law a year ago requiring this independent verification, giving legitimacy to a practice that started a decade ago.

So far, the country has been paying in excess of $30 million a year to pursue this independent verification agenda. This year the contracts of some of the companies it has hired to this work were revised and one terminated, but the net effect remains the same. Roughly $18 million goes to one contractor for monitoring call volumes and network fraud, and an unclear amount, but certainly not less than $12 million, goes to another for mandatory interconnect services, which were also justified on grounds of minimising telecom sector fraud (in most countries, telecom networks enter into direct arrangements to interconnect or decide on their own to use a clearing house.)

There is a growing concern that these programs are ineffective, and are merely enriching vendors. Everyone agrees that only about 20% of all the taxes telecom companies pay are sensitive to this kind of topline revenue monitoring, if it does in fact works. These taxes – notably the Communications Service Tax – net less than $80 million a year. To spend nearly 40 cents to monitor, assure and collect each $1 is highly irregular. Ghana generally spends about 2 cents for each dollar of corporate tax it collects. In the UK, the costs are half that amount for equivalent revenue per taxpayer.

Having some time on my hand this evening, I decided to break down the problem, and design a solution from the bottom up.

In tribute to the Godfather of “tropically tolerant tech”, Herman Chinery-Hesse, we are calling it: “The Nii Tettey Telco Tax Assurance System” (NTETAX).

The chief design constraint was that it should cost no more than $55,000 a year to set up and run, but it should be more effective than the Afriwave-Subah-KelniGVG model that has been in use since 2015 at a cost of more than $30 million per year by a significant factor. I approached the problem from a Value Operations Methodology standpoint. The process has been, at a very high level, graphically described in the figure above.

Here is how NTETAX will work.

A. A GSM SIM gateway with modem-router combo is set up with 6 racks containing 960 SIM cards. Set-Up Cost & Maintenance for 1-yr = $2200

B. An HP proliant RAID to store data, host databases, and mount application servers. Hardware and software firewalls and security filters. Setup Cost & 1-yr Maintenance = $9,000.

C. A SAAS subscription package for Equinox or Neon CDR analysis and re-rating software. Cost for 1-yr = $9600

D. Open-source operating systems and work on database setup and configuration. A small, open-source, data analysis suite (for regressions, correlations, and basic data mining). Cost = $3200

E. Personnel = $28,000

F. Physical Data Room = Gratis (NCA or NITA location – these are Ghanaian state agencies with considerable material resources)

G. Airtime and mobile money costs = $1200

Here is how it will work:

A. Randomly sequenced automatic call, data, mobile money, SMS and USSD sessions are initiated from the SIM gateway to all CST-collecting ISPs and telcos round the clock.

B. These probe-sessions are duly recorded in the database.

E. CDRs are received at the end of each working day in XML or CSV format from each of the regulated CST collectors via an FTP interface or other agreed file transfer protocol. The data dumps go into a database and are primed for analysis.

F. The Equinox or Neon software parses and generates summary statistics and conducts re-rating based on shared tariff rules.

G. Re-rated Service Charge Detail Records (SCRs) are automatically compared with telco-supplied SCRs. (“Telco” = telecom network operator).

H. The “mystery call” probes from the SIM gateway records are now meticulously crosschecked by the proprietary application with data contained in the CDRs and SCRs sent from the telcos. An error rate of 1 out of 10,000 sessions may be reasonable.

I. If the error rate is exceeded, a reaction limit module generates an alarm. This is a sure sign of an anomaly (note, however, that the mistake may not be deliberate) and a prompt for investigative action.

J. The SIM cards in the SIM racks are replaced at a constant rate.

K. Naturally, the MSISDNs of the probe SIMs have to be in an encrypted file, as breach would compromise the whole model. This system can be up and running at the NCA and NITA in 2 months. Training and handover should take a further 6 weeks. Three new personnel are required to oversee the operation in the data room – a DevOps engineer, a Revenue Analyst and Database Administrator. Existing personnel working for the Ghanaian Tax Authorities can be trained to support as investigation officers and assistant revenue analysts.

Unless some fatal flaw is detected upon closer scrutiny by some ultra-specialist, this compact solution seems on first inspection a superior replacement for the current system which relies solely on CDRs from the telcos but lacks both adequate re-rating capacity as well as a ground-truthing scheme. And of course, it costs $55,000. Even if it replaces only the traffic monitoring and anti-fraud solution currently in place, that’s still more than $17.9 million saved. Not small change in any Sub-Saharan African country.

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.