The Ministry of Food and Agriculture has commenced negotiations with a private rice growing company to take up the government’s 30 per cent stake in the Prairie Volta Limited, popularly known as the Aveyime Rice Factory, in return for capital injection into the business.
The government’s decision to exit the rice farming and processing company is seen as the best step towards reviving the ailing business.
It followed the findings of an independent report by KPMG, which showed that the company needed reinvestment to be able to stay afloat.
But with the government not in the capacity to inject new capital into the business, a Deputy Minister of Food and Agricultural (MoFA), Dr Sagre Bambangi, said the ministry had come to the conclusion that offloading its 30 per cent shares to a private investor was the best way to go.
Although the minister declined to name the investor involved, he told the GRAPHIC BUSINESS that the negotiations were at an advanced stage.
The Prairie Volta Limited (PVL) is a joint venture company between the Prairie Texas Incorporated in the United States of America (USA) and the government of Ghana.
Prairie holds 40 per cent shares while government of Ghana and the GCB Bank hold 30 per cent shares each.
In April 2008, Prairie Texas bought the assets of the defunct Quality Grains Company Limited. This was after the government had signed an agreement with Prairie to takeover Quality Grains’ assets, which comprised rice milling plant with 60,000 metric tonnes capacity per annum, 1286-hectare farm site and irrigation infrastructure and machinery, all located at Aveyime Battor and its environs.
Through the agreement, the assets represented the government’s contribution to the project.
Shut down of company
Per the agreement, Prairie Texas was also required to pump in a working capital of US$ three million for the operations of the factory.
But unfortunately, Prairie Texas failed to bring in the required working capital and operated on losses in 2011, 2013, and 2014. It only recorded a marginal profit of GH? 62,002 in 2012.
Subsequently, the rice factory, which was expected to create jobs and save the country over US$ 600 million from the importation of rice, was shut down in 2015 and all the workers were laid off.
The deputy minister was, however, confident that the subsequent offloading of the ministry’s shares would bring in the needed capital and help unleash the full potentials of the company.
He said government would, however, still maintain its interest in the company since the GCB Bank, which is majority owned by government, would still maintain its 30 per cent share in the company.
Government must be cautious
The Member of Parliament (MP) for North Tongu, Mr Samuel Okudjeto Ablakwa, also in an interview with the GRAPHIC BUSINESS, believed government offloading its shares in order for a private investor to take over was the right way to go.
“The company is in my constituency and I visit it anytime I go there so I am fully aware of the challenges. What they need now is capital injection so if government offloading its shares will bring in additional capital, then why not?” he stated.
He, however, cautioned government to ensure what happened with Prairie Texas did not happen again, when it failed to inject the needed capital.
“Lessons have to be learnt. Whoever the government is planning to sign the agreement with, government must be very sure and convinced the new investors have what it takes and are willing to inject additional capital before the facility is handed over to them,” he said.
“If possible, an escrow account should even be opened so that the new investor pays in the money that will be injected into the company before the facility is handed over,” he added.
Leasing of Juapong Milk Processing facility
Touching on the ministry’s plans for another abandoned government project which is the Juapong Milk Processing Factory, the deputy minister said government had signed a MoU with Simpaul Limited, producers of happy cow cheese and other milk products for lease of the Juapong Milk Processing Factory.
In line with government’s agenda to promote dairy farming in the country, MoFA sourced for funding from the Canadian government through the Food and Agriculture Budgetary Support in 2004 to construct six milk processing facilities in cattle producing areas of the country of which the dairy factory in Juapong in the Volta Region was part.
The primary objective of the processing facility was to mop up and purchase raw milk produced by cattle farmers for processing into other products for consumption.
Unfortunately, the linkage with the private sector (cattle farmers) to use the facility was not successful and the facility was never used and remained exposed to the vagaries of the weather and deteriorated over time.
The Deputy Minister, responding to a question posed by Mr Okudjeto Ablakwa on the floor of Parliament, said Simpaul had commenced renovation works at the facility which had become a habitation for reptiles and rodents.
“They have promised to complete the renovation by the fourth quarter of the year and commence operations soon after,” he said.