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The Supreme Court on 8^th November, 2023 delivered a judgment in the case of Derick Adu-Gyamfi v. the Attorney General in which parts of some provisions in the Companies Act, 2019 (Act 992) on disqualification of persons who can be appointed directors have been declared as unconstitutional. It is important for lawyers, in particular, and businesses, in general, to understand the full import of the judgment.

The Claim: The plaintiff in the case claimed that specific provisions in the Companies Act that disqualify a person from being a director are unconstitutional. The disqualification criteria challenged are:

• Parts of section 13(2)(h)(i) and section 172(2)(a)(i), which disqualify a person charged with a criminal offence involving fraud or dishonesty;
• Parts of section 13(2)(h)(ii) and section 172(2)(a)(i), which disqualify a person charged with a criminal offence relating to the promotion, incorporation or management of a company
• Part of section 177(1)(c), which gives the High Court the power to restraint a person from being a director if that person has been found culpable of a criminal offence relating to a corporate entity, even where the person is not convicted; and
• Section 177(1)(e) which gives the High Court the power to restrain a person from being a director if that person is under ongoing investigation by a criminal investigation body or the Registrar of Companies or an equivalent foreign institution for offences stated in the subsection.

It was argued that since a person is presumed innocent until proven guilty and entitled to a fair trial, seeking to disqualify the person from being a director before actual conviction is unconstitutional.

The Decision: The Supreme Court agrees with the Plaintiff on the first and second claims that the disqualification under (a) and (b) above on mere charge is unconstitutional. However, the Supreme Court disagreed with the position in the third and fourth claims and held the provisions as constitutional since the determination will be made by the court and the affected is given a hearing. The section further allows the person to apply to the court for leave to be a director despite the restraint.

The Effect of the Decision on the Companies Act

Contrary to reports that subparagraphs (i) and (ii) of Section 13(2)(h) and subparagraphs (i) and (ii) of section 172(2)(a) of the Companies Act have been struck out, the subparagraphs are still in effect subject to deleting the words “charged with or” from sub-paragraphs. The affected subparagraphs will now read:

“13. (2) The application shall include:

(h) a statutory declaration by each proposed director of the proposed company indicating that within the preceding five years, that proposed director has not been

• convicted of a criminal offence involving fraud and dishonesty;
• convicted of a criminal offence relating to the promotion, incorporation or management of a company; or
• declared insolvent or if that proposed director has been insolvent, the date of the insolvency and the particulars of that company;”

“172 (2) A person shall not be appointed as a director of a company unless the person has, before the appointment

• made a statutory declaration submitted to the company and subsequently filed with the Registrar to the effect that, the person has not within the preceding five years of the application for incorporation been
• convicted of a criminal offence involving fraud or dishonesty;
• convicted of a criminal offence relating to the promotion, incorporation or management of a company; or
• a director or senior manager of a company that has become insolvent or if the person has been, the date of the insolvency and the particular company; and”

In sum, a person charged with a criminal offence involving fraud or dishonesty or relating to the promotion, incorporation or management of a company but not convicted is no longer automatically disqualified from being a director of a company. However, the person must still make a statutory declaration on the fact that he has not been convicted of any such offence.

The import of the Supreme Court holding that paragraphs (c) and (e) of section 177(1) are unconstitutional is that a person who has been charged with a criminal offence relating to a corporate entity or a person under ongoing criminal investigation can still be restrained by the High Court from being a director. Such a person need not be convicted. The court on its own can restrain such a person, or an action to restrain such a person can be instituted by the persons listed in section 177(6) of the Companies Act.

The Wider Implication of the Judgement

There are other statutes other than the Companies Act which have similar provisions that disqualify a person from holding a position or being able to act in some capacity on the mere fact of being charged with an offence, even though not convicted, without recourse to the court. For example, section 5(2)(a) of the Incorporated Private Partnership Act, 1962 (Act 152) gives the Registrar of Companies power to refuse to register a firm if a person named as a partner has “within the preceding five years, has been guilty of fraud or dishonesty, whether convicted or not, in connection with any trade or business”. [emphasis mine]. This and other similar provisions in statutes in force will be affected by the decision in the case of Derick Adu-Gyamfi v AG.

The judgement is a call on the Law Reform Commission to take steps to bring such statutes in line with the Constitution.

The Government has proposed to set up Special Economic Zones (SEZs) in key urban areas; this establishment of SEZs is a flagship project under the national development blueprint of Vision 2030., the country’s development program 2008-2030 Launched by former President Mwai Kibaki. SEZs are to contribute towards the transformation of the country’s economic base in order to realize higher sustained growth, employment creation, and poverty reduction.

Background to the legislation

The introduction of the Special Economic Zones Act, 2015 (the Act) is intended to facilitate unlimited access to local and international markets. The SEZs are expected to help investors cut down on key cost drivers such as transport and provide benefits in terms of tax exemptions.

Principal objectives of the legislation

The purpose of the Act is to establish SEZs and to create incentives for economic and business activities in designated areas as well as removing impediments to economic and business activities that generate profit for enterprises in these zones.

To whom does the legislation apply?

The Act applies to any persons seeking to carry on business as a SEZ developer, operator or enterprises. The zones are currently undergoing a pilot programme in Mombasa (the nation’s second-largest city, on the Kenyan Coast), Lamu, and Kisumu.

How does the legislation apply?

A person must apply for a licence permitting them to operate in a SEZ. The licensed SEZ enterprises (SEZEs), developers and operators enjoy numerous exemptions. For example, they are exempt from existing taxes and duties payable under the Customs and Excise Act, Income Tax Act, East African Community Customs Management Act and Value Added Tax Act.

Future review/revision and steps required in regard to the legislation

There needs to be clear transition provisions with respect to the fate of Export Processing Zones (EPZs) it has been suggested that the government plans to freeze new investments within its EPZs before the end of 2015 as it takes up the SEZs model.

Competition law and policy have increasingly influenced the structure of the industry with the aim of achieving industry structures that catalyze competitiveness. A monopoly, duopoly or highly concentrated oligopoly are not desirable industry structures. Therefore, through application of competition law, it is expected that this would contribute to the free market economy by ensuring and provoking open and fair markets e.g., by, inter alia, questioning & scrutinizing market agreements, and reviewing commercial & administrative barriers to regional and domestic trade. The underlying theory of harm is that markets are susceptible to be captured by greedy business entrepreneurs to the detriment of other possible beneficiaries hence the need for a system to “monitor” and “control” anti-competitive agreements in the market.

ECOWAS Competition Law

The Economic Community for West African States (ECOWAS) adopted in 2008 the Supplementary Act A/SA.2/06/08 on the Establishment, and Function of the Regional Competition Authority for ECOWAS. Article 3[b] thereof mandates the competition authority to carry out on its own initiative or at the request of private persons or government officials from the Member States or of the Community Court of Justice, such investigations in relation to the conduct of business in the Common Market as will enable it to determine whether any enterprise is engaging in business practices in contravention of the Supplementary Act adopting the Common Competition Rules.

The competition concerns

Article 4 of Supplementary Act A/SA.1/12/08 “Adopting Community Competition Rules and the Modalities of their Application within ECOWAS [“Competition Rules”], sums up the competition concerns. It provides that the Supplementary Act (SA) applies to agreements, practices, mergers, and distortions caused by Member States which are likely to have an effect on trade within ECOWAS. The Competition Rules under the SA concern notable acts, which directly affect regional trade and investment flows and/or conduct that may not be eliminated other than within the framework of regional cooperation.

Mergers and Acquisitions

Inevitably, one of the key roles for competition law and policy is the regulation of mergers and acquisitions that are implemented in commerce and industry.  The word “merger” is ordinarily generically used in many jurisdictions to refer to all forms of amalgamations which include takeovers, acquisitions, joint ventures or other forms of control.

Article 1[a] of the said SA’s Competition Rules, define ‘acquire’ as: in relation to:

• goods: means to obtain by way of gift, purchase or exchange, lease, hire or hire purchase;
• services: means to accept benefit from or to perform the service;
• intellectual property rights: means to obtain by license, assignment or government grant;

Interestingly, Article 3 of the Supplementary Act A/SA.2/06/08 on the Establishment, Function of the Regional Competition Authority for ECOWAS does not have a provision on the functions of the ERCA to include review of mergers but this may be captured under “agreements”.

Mergers in a Single Economic Unit

From best practice, a merger occurs between independent enterprises and not those that fall within the same shareholding structures [e.g, a holding company and its subsidiaries or between “interconnected” enterprises – these are a Single Economic Unit [or single economic enterprise]

Article 1[2] and [3] of the Competition Rules provide some insight that any two companies are to be treated as interconnected companies if one of them is an affiliate of the other or both are subsidiaries of the same company; and a group of interconnected companies shall be treated as a single economic unit. It goes further to state that for purposes of the SA, a company is a subsidiary of another company if it is controlled by that other company. Mergers occurring within a single economic unit are not a competition concern.

Consideration of Control of another Enterprise

Mergers leading to control of another enterprise, a product or market are often a concern for competition authorities.  Article 1[1][i] of the Competition Rules, provide that “control” in relation to a company means the power of a physical or moral person to secure by means of

• The holding of shares or the possession of voting power in relation to that company; or
• Any other power conferred by the company’s constituent documents or other documents regulating the company;
• The effective exercise of power of decision within the company; so that the company’s business is conducted in accordance with that individual’s wishes.

Merger Assessment Guidelines

Merger guidelines are under preparation by the ECOWAS Competition Authority [ERCA]. These will expand on the merger assessment criteria as well as the mod

As the world continues to grapple with the effects of the Covid-19 pandemic, the year 2021, has commenced with the African Continental Free Trade Agreement (AFCFTA) becoming operational. The start of the AfCFTA is one of the most important steps made by Africa in its existence and creates a new direction that shakes the long effects of colonialism and foreign exploitation. Africa matches forward with confidence on a journey to economic independence which is the final struggle to liberation. Africa has an opportunity to fully achieve its potential by taking full advantage of the AFCFTA by allowing Africans work with fellow Africans. The effects of Covid 19 now present Africa with an existing opportunity to redeem its self and that of its people by fully embracing the advantage created by a 2 trillion US Dollar market with 1.2bn people. The start of the AfCFTA means business opportunities for millions of our people and creates new value chains for SME’s, leveraging the quest for industrialization.

The commencement of the AFCFTA provides fresh impetus for African entrepreneurs to enter new markets and provides an opportunity for the continent to enter into a new era of industrialization because trade will be duty free. Africa is in position to start trading on preferential terms with 54 countries out of 55 having signed and majority having ratified the AFCFTA to fulfill the objective of the ‘‘AFRICA WE WANT 2063 AGENDA’’. The starting of AFCFTA trading should now create an opportunity for us to harmonize our e commerce agenda and issues in Intellectual Property and competition law. The African trade gateway hub to be developed by the Afriexim bank should help traders across Africa access business opportunities and conduct due diligence on business across Africa as well as access credit from the Afriexim bank to support business and cross border trade.  The Afriexim bank is offering 40billion US Dollars with the start of the AFCFTA this year to support the implementation of the Africa Continental free Trade Area and will work with at least one bank to support intra African trade in each African Country. This should create opportunities for the financial sector in Uganda to support the AFCFTA and Africa’s industrialization Agenda.  According to the Economic commission for Africa, the AFCFTA will accelerate intra Africa trade by 25 to 35 % equivalent to 35billion dollars which will reverse the effects of covid 19 on the continent. The call by the Economic Commission for Africa to support countries develop implementation strategies for the AFCFTA should be welcomed by the Ugandan government as soon as possible in its agenda of taking advantage of the AFCTA.

Continued democratic inconsistences and human rights violations subjugate Africa’s efforts and struggle to redeem itself from economic subjugation and the effects of colonialism. We can no longer blame foreign subjugation. The future is in our hands.

Currently, the Mining Act 1940 (Chapter 306 of the Laws of Kenya) regulates all mining activities in Kenya. The legislative proposal giving rise to the Mining Bill was recently submitted by the Cabinet Secretary for Mining. Once the Bill is assented to by the President, it will repeal the existing legislation relating to mining and it will establish a new legal framework for the management of mineral resources in Kenya.

Following the promulgation of the new Constitution, more focus was brought under Article 69 to ensure sustainable exploitation, utilization, management, and conservation of the environment and its natural resources. Whilst focusing on the above, the Constitution requires the State to ensure there is equitable sharing of accruing benefits. Other than the constitutional need to amend the Mining Act accordingly, it is over 60 years old which makes it outdated as it fails to accommodate both technological and economic advancements.

Technological developments have made it possible for information to be shared electronically across the world, and most importantly, make payments and trade on a common virtual platform. The Bill therefore embraces technological advancements by providing for a computerized mining cadastre and registry system which will include an online transactional facility to enable applications for the granting and renewal of mineral rights to be submitted online.

Policies to bolster economic growth have also been incorporated into the Mining Bill and a good example is local content. “Local content” is defined as the added value brought to a host nation (and local and regional areas in that country) through activities such as oil exploration, and mining among others.

Principal objectives of the legislation

State Corporation

It specifically establishes a mining corporation (previously not in existence), that will be the investment arm of the government in respect to minerals. The corporation’s functions among others will be to engage in mineral prospecting and mining. The corporation will also have a chief executive officer who will be recruited by the corporation and will be responsible for the day-to-day administration and management of the affairs of the mining corporation.

The Board

The mining corporation will also have a board whose chairman will be appointed by the President, the Principal Secretary responsible for mining or a representative; the Principal Secretary responsible for the National Treasury or a representative; the Principal Secretary responsible for trade or a representative and four other persons not being employees of the corporation, of whom not more than two shall be public officers. The introduction of this corporation will go a long way in bolstering the economy because it will ensure that the proceeds made by mining corporations are invested back into the country.

Mineral and Metals Commodity Exchange

The Mining Bill also aims to facilitate efficiency and security in mineral trade transactions by making provision for the Cabinet Secretary to establish a mineral and metals commodity exchange. Unlike before, the geoscience information will also be recorded and made available to the public upon request. A minerals and metals exchange is a market where various minerals and contracts based on them (derivative products) are traded. The exchanges usually trade future contracts on the minerals-such as trading contracts to receive gold in a certain month at a certain price. With such an exchange in place, the middlemen and other intermediaries who make money out of speculation are kicked out of the mineral value chain. The aim of this would be to lead the region in trade despite not having all the minerals and metals.

Mining Tribunal

An important element to be highlighted is the introduction of the mining tribunal. Previously, disputes would be lodged with the Commissioner of Mines and Geology but the Mining Bill provides for an ad hoc tribunal to be set up by the cabinet secretary in consultation with the Chief Justice.

New Offices

The Mining Bill has also done away with the office of the Commissioner whose primary duty was to ensure the provisions of the previous Act were followed. The Mining Bill states that the Cabinet Secretary for mining will be responsible for its general administration. It gives him extensive powers to make regulations to prescribe the procedure for consideration of applications made under the Bill and also to negotiate, grant, revoke, suspend, or renew mineral rights. Another addition is the Directorate of Mines and the Directorate of Geological Survey both of whom have their specific functions listed in the Mining Bill.

However, the Cabinet Secretary is empowered by the Mining Bill to establish additional directorates if need be. This change could either remove the previous directorates listed below or be amalgamated altogether:

1. Directorate of Mineral Management and Regulations;
2. Directorate of Geological Surveys;
3. Directorate of Mineral Promotion and Value Addition;
4. Directorate of Mine Health, Safety and Environment;
5. Directorate of Resource Surveys and Remote Sensing; and
6. Directorate of Corporate Affairs.

Mineral Rights

Another highlight in the Mining Bill is that the requirements of obtaining a mining right have been categorized into those needed for a natural person, and for a corporate entity. The current Mining Act prohibits a company from being granted a prospecting right; it only states that it could be granted to an individual as an agent of the company. Additionally, the provision on conditions to be fulfilled for any applicants is lengthy and makes it difficult to easily construe the conditions needed.

Furthermore, the Mining Bill introduces large and small scale operations which will determine the mineral right to be granted. The licences and permits granted to a mineral right holder engaged in large scale operations will include a prospecting licence, a retention licence, or a mining licence. On the other hand, those involved in small scale operations will include a prospecting permit or a mining permit. Large scale operations and small scale operations will be designated by the Cabinet Secretary. It should be noted that the Mining Bill expressly states that permits under small scale operations will only be given to Kenyan citizens or a body corporate owned by Kenyan citizens.

The Bill has also provided for rights granted on both private and community land which was not there before.

       i. Private Land

Mineral rights on private land will only be granted to applicants if they have express consent from the owner and this will be through a legally binding agreement which allows prospecting or mining operations to take place or for an agreement concerning adequate compensation.

       ii. Community Land

Mineral rights on community land will be given to applicants if they obtain consent from the authority in charge of administering such land or the National Land Commission in relation to community land that is alienated.

Mineral Agreements

The Mining Bill also introduces mineral agreements which may be entered into, by a prospecting licence holder and the Cabinet Secretary with respect to any matter related to operations under the licence. Although the Mining Bill does not make it mandatory, it states that the Cabinet Secretary will prescribe the type of operations that will be subject to such an agreement.

Local Content

As mentioned in the background of this article, local content is one of the elements introduced by the Mining Bill. Though local content has not been expressly defined in the Mining Bill, the Bill does ensure its provision by requiring mineral right holders to submit to the Cabinet Secretary a detailed programme for recruitment and training of Kenyan citizens in a bid to ensure the transfer of skills and capacity building for citizens. There is also an obligation for mineral right holders to source for materials and services. Another obligation is one to give employment preference to Kenyan citizens. The spirit behind these provisions is similar to the local content provisions in both the Energy Bill and the Petroleum, Exploration & Development Bill of 2015. The Mining Bill gives the Cabinet Secretary powers to issue further policy guidelines to give further effect to these requirements.

Government Participation

Where the mineral rights are for large scale operations or mining operations relating to strategic minerals, the Mining Bill stipulates that the State will acquire 10% free carried interest in the share capital of the right in respect of which financial contribution will not be paid by the State. There will also be a limitation on capital expenditure for the mineral right holders but this will be prescribed by the Cabinet Secretary. Where the holder’s capital has exceeded the limit within 4 years of obtaining the licence, there will be a requirement to offload at least 20% of its equity at a local stock exchange.

To whom does the legislation apply?

The Mining Bill will apply to the Ministry of Mining headed by the Cabinet Secretary, the mining corporation and its Board, the Directorate of Mines and Geological Survey, applicants of mineral rights, mineral right holders, and the mining tribunal. All these bodies are established by the Mining Bill except for the Ministry. With regards to the substantial minerals, the Mining Bill has specified in its First Schedule the following categories; construction and industrial materials; precious stones; precious metal group; semi-precious stones group; base and bare metal group; fuel mineral group; and gaseous minerals. Reference should be made to the first schedule of the Bill to see where the specific mineral is categorized. The Cabinet Secretary in charge of mining may, from time to time, by notice in the Gazette, amend the First Schedule. However the Mining Bill will not apply to matters relating to petroleum and hydrocarbon gases.

How does the legislation apply?

The Mining Bill will repeal the entire Mining Act (Chapter 306) once it is assented and comes into force.

Future review/revision and steps required in regard to the legislation

In order for the Mining Bill to be effective, it needs to be accompanied by regulations and policies. Most of the provisions discussed above anticipate for the Cabinet Secretary to provide policy guidelines. The better avenue would have been for the drafters of this Bill to provide anticipatory regulations that once implemented, would be subject to change by the Cabinet Secretary if need be. Regulation is of critical importance in shaping the welfare of economies and society. The objective of regulatory policy is to ensure that legislation works effectively, and is in the public interest.

In over a decade of commercial oil production in Ghana, the government and policy makers in the energy sector have been steadily working on the right formula to achieve that regulatory sweet spot where direct foreign investment converges with Ghanaian participation and content. The core objective has been to achieve the desired levels of state-of-the-art technology and technical know-how, technology and skills transfer, optimal in-country spend, value addition, job creation, and competitiveness in our upstream sector. The legal framework for Ghanaian content and participation in upstream activities started out originally as contractual commitments in petroleum agreements to employ and train Ghanaians, and to give preference to materials, services and products produced in Ghana which meet international industry standards. This has evolved into regulations – the Petroleum (Local Content and Local Participation) Regulations, 2013 (L.I. 2204) which has recently been amended by the Petroleum (Local Content and Local Participation) (Amendment) Regulations, 2021 (L.I. 2435). The purpose of these regulations is to further enhance and expand the opportunities for Ghanaian participation and value creation in the sector via three thematic areas: a redefinition of the indigenous Ghanaian company (IGC); alternative business arrangements for collaboration with foreign entities and a defined scope of services and goods to be reserved for supply solely by IGCs. This article highlights two of these new regulatory changes and the opportunities they present to the market.

Background to Local Content and Local Participation Regulations

The National Energy Policy 2010 (NEP 2010) highlighted “the need to build the necessary human, financial and technological capacity of Ghanaians to be able to participate fully in the petroleum industry”. The aim was to stimulate accelerated economic growth, job creation, poverty reduction and general prosperity among the Ghanaian people through the oil and gas industry. The NEP 2010 further concluded that: “[t]his can be achieved through a well formulated Ghanaian local content and participation policy and regulatory environment…”. This resulted in the enactment of L.I. 2204 with prescribed thresholds for local participation at the contractor level and, minimum local content and in-country spend at the supplier/subcontractor level.

Historically, the legal framework for upstream operations has always emphasised the employment and training of Ghanaians by foreign participants in the sector. However, under L.I. 2204, the indigenous Ghanaian company (IGC) was formally identified as a defined category of service provider through which the local content and local participation goals may be realised. Initially, the IGC was an entity incorporated in Ghana with a minimum of 51% Ghanaian equity holding, 80% Ghanaian executive and senior management staff and 100% Ghanaian non-managerial staff. To help achieve the local content and participation objectives of the NEP, L.I. 2204 afforded IGCs specific advantages over joint venture companies (JVCs) and international oil companies (IOCs) including:

(a) entitlement to preferential treatment in the award of petroleum agreements and petroleum licenses;

(b) the opportunity to own up to 5% in all petroleum interests granted by the State;

(c)  entitled right to a 10% price preference in the award of contracts for the provision of goods and services for upstream operations;

(d)  the right to a minimum of 10% shares in all companies authorised to supply goods and services in the sector; and

(e) the exclusive right to supply specific services in the sector such as legal, financial and insurance services.

The amendment under L.I. 2435 is intended to maximize Local Content & Local Participation in the energy sector in accordance with the National Energy Policy 2020. The key areas are the expanded Ghanaian participation in IGCs and the new mechanisms for collaboration with foreigners which have been analysed below.

1. a) Expanded Ghanaian Participation in IGCs

Under L.I. 2435, an IGC has been redefined to require incorporation in Ghana with a 100% Ghanaian equity holding, 80% Ghanaian executive and senior management staff and 100% Ghanaian non-managerial staff. This new regime presents a shift from majority Ghanaian ownership to full Ghanaian ownership. The IGC is now truly Ghanaian in substance and form with unprecedented access to various opportunities in the sector, notably the exclusive right to provide an expanded range of services and goods, including electrical equipment and materials, industrial and domestic gases, network installation and support services, ship chandelling, warehousing, etc. With the recent change in the IGC shareholding structure, former IGCs with foreign interests which hitherto could benefit from the above listed advantages will now give way to wholly Ghanaian owned businesses. This may lead to an increase in participation of IGCs in the various roles as contractor party and service provider as discussed below.

• The IGC as a contractor party

Following the enactment of L.I. 2204, about 11 out of the 14 petroleum agreements awarded by the State include IGCs as contractor parties. This new IGC regime seeks to better protect Ghanaian interests and expand the opportunities for Ghanaian participation by eliminating the possibility of indirect foreign interests in the 5% participation interest reserved for Ghanaians. With this key change, Ghanaian owned businesses have an enhanced opportunity to increase their investments, build capacity, and optimize technology and skills transfer to grow the upstream sector. The change also presents an opportunity for IGCs to prepare their businesses, forge partnerships, pool resources and scale up to attract the funding required to cover the IGC share of capital expenditure required for petroleum operations.

• IGC as a service provider

Currently, the Petroleum Commission has registered over 1600 IGCs, with approximately 600 actively operating in the service segment of the upstream sector. Under L.I. 2204, IGCs are entitled to first preference in the bidding process for the supply of goods and services.  Additionally, during a bidding process, an IGC cannot be disqualified exclusively on the basis that it did not offer the lowest price. Where the difference between the total value of the bid of a qualified IGC and the lowest bid does not exceed 10% of the lowest bid, the contract must be awarded to the IGC. Essentially, an IGC should be prioritized over a JVC in a tender where the IGC’s bid price is at most 10% higher than the quote from the JVC. This price preference is aimed at maximising local content in all aspects of the industry value chain to boost the capacity and competitiveness of Ghanaian owned entities in the upstream market. Today, with the new mandatory shareholding structure, many of the existing IGCs will lose their IGC status and the right to the above-mentioned statutory benefits. These advantages are now available to only Ghanaians. This will lead to the exit of former IGCs with foreign interest or their transformation into wholly owned Ghanaian entities which will create room for more wholly owned Ghanaian businesses to participate in this competitive market segment.

1. Mechanisms For Collaboration with Foreigners

As previously stated, under L.I. 2204, foreign owned businesses may only supply goods and services in the upstream sector in association with IGCs, via a registered JVC where the IGC holds a minimum of 10% shares. The impact of the mandatory requirement for collaboration between foreign owned businesses and IGCs in the upstream service segment has been revolutionary in promoting capacity building through knowledge and skills transfer to Ghanaian entities from their more experienced foreign partners. Although some JVCs have, for a myriad of reasons, been unsuccessful, they are in the minority. Through these collaborations, many Ghanaian entrepreneurs have seen radical growth in their capacity in their core area, as well as new insights and expertise in other emerging areas as a result of unprecedented access to greater resources, technology and finance. Many Ghanaian partners in JVCs now have access to new markets and have been able to scale up in spite of their limited capacity, giving them competitive advantage to generate economies of scalability.

In spite of the success of the JVC structure under LI 2204, experience over the 9 years of implementation has highlighted areas for improvement. The intervention by the Ministry of Energy and the Petroleum Commission with the introduction of alternative models and structures for collaboration under LI 2435 is most timely and will ensure a wider berth for knowledge and skills transfer in the upstream sector. The alternative structures provided under LI 2435 have been discussed below.

The Alternative structures

L.I. 2435 authorizes the use of channel partnerships and strategic alliances as complementary options to the JV structure in the provision of goods and services in the upstream sector. A channel partnership is usually established between a manufacturer or producer with another company such as a reseller, service provider, vendor, retailer or agent, to market or sell their services, products or technologies. A strategic alliance on the other hand refers to an arrangement between two or more companies to share resources to undertake a specific mutually beneficial project, while each party retains their corporate independence.

With the establishment of these alternative structures, the JV ceases to be the only channel through which both an IGC and a foreign entity can collaborate to provide services in the industry. The Petroleum Commission is mandated to exercise a discretion and give the appropriate direction to enable a foreign entity or an IGC provide services in Ghana through such arrangements where it is of the opinion that “a channel partnership or strategic alliance will deepen local content and local participation and maximize technology transfer to the IGC”.

The introduction of these alternative structures will allow more flexibility and efficiency in service delivery in the upstream sector. Through channel partnerships and strategic alliances, IGCs and their foreign partners may share resources to execute defined supply/service scope while each party retains their independence with no obligation to establish and register a company. Parties in channel partnerships and strategic alliances are able to bypass the strict formal requirement for setting up a JVC such as the incorporation of Ghanaian limited liability companies by both the IGC and its foreign partner and the registration of the JVC with the Ghana Investment Promotion Centre (GIPC). The partners are able to maintain their existing corporate structures while managing their roles and responsibilities through contractual arrangements.

These new regulations provide a tremendous improvement on the existing framework for local content and open up the upstream service/goods supply space with unprecedented opportunities for more IGCs to participate in the sector, improve their product offerings and grow their skills and capacities.

Conclusion

The new IGC requirements and the introduction of alternative structures present greater opportunities for Ghanaians to benefit from the upstream oil and gas industry. Whilst the regulations provide the framework, the full potential of this new regime will not be achieved unless Ghanaian participants adopt the right legal structures and contracts for their engagements in oil and gas operations. This will require seeking and offering the right legal advice, not only in setting up of their businesses, but in the drafting and negotiating of contracts.

Kenya intends to overhaul its mining laws currently contained in the Mining Act (Cap 306 of the Laws of Kenya) by passing the Mining Bill, 2014 that is currently being debated in Parliament. The Mining Bill, if passed in its current form, will introduce a range of new provisions among them being those on local content.

Principal objectives of local content regulations in the mining sector

Currently, the Mining Act does not make provision for local content. The rationale behind local content in the proposed Mining Bill lies in the need to develop the economy of a host nation and its surrounding region through mining activities.

(a) Local Equity Participation

The Mining Bill states that where a company whose planned capital expenditure is over the prescribed limit it shall, within 4 years after obtaining a mining license, offload at least 20% of its equity at a local stock exchange. It should be noted, however, that the Cabinet Secretary may extend the required period if he deems it fit after consulting with the National Treasury.

(b) Preference for Local Product

The Mining Bill requires mineral right holders who are in the conduct of prospecting, mining, processing, refining, and treatment operations, or any other dealings in minerals, to give preference to the maximum extent possible to:

• materials and products made in Kenya;
• services offered by Kenyan citizens; and
• companies or businesses owned by Kenyan citizens.

(c) Employment

As a general requirement, mineral rights holders will be under an obligation to give preference to Kenyan citizens when it comes to employment. The Mining Bill provides that before one is granted mineral rights in Kenya, one will be required to submit for approval to the Cabinet Secretary responsible for mining a detailed programme for the recruitment and training of citizens of Kenya. This is aimed at ensuring skills transfer to and capacity building for the citizens.

The Cabinet Secretary will be required to make regulations to provide for:

• the replacement of expatriates;
• the number of years such expatriates shall serve;
• the number of expatriates per capital investment; and
• the collaboration and linkage with universities and research institutions to train citizens.

It is important to note that the Bill has categorized mining activities into large-scale operations and small-scale operations. Mineral rights for small-scale operations will only be granted or be entitled to Kenyan citizens or a body corporate wholly owned by Kenyan citizens. On the other hand, when it comes to large-scale operations, a holder of a mineral right will be required to:

• only engage non-citizen technical experts in accordance with such local standards for registration as may be prescribed in the relevant law;
• work at replacing technical non-citizen employees with Kenyans, within such reasonable period as may be prescribed by the Cabinet Secretary in charge of mining;
• provide a linkage with the universities for purposes of research and environmental management;
• where applicable and necessary facilitate and carry out social responsibility to the local communities; and implement a community development agreement

It is important therefore that interested parties confirm from the outset whether their mining activities would fall under large-scale or small-scale operations in order to be in a position to ensure compliance as the requirements for approvals in each of these operations are different.

It is the prime responsibility of the Government to provide public infrastructure and related services to address public needs. However, in most developing countries including Ghana, there is a huge gap between infrastructure needs and infrastructure delivery by Government. One reason for this is inadequate resources for Government to use to provide needed infrastructure. One option to deal with this is Government engaging private sector to deliver such public infrastructure and related services. Public Private Partnerships (PPPs) have become one of the most preferred options for engaging the private sector to support Government in the provision of public infrastructure and related services.

PPPs simply refer to any form of contractual arrangement by which public sector entities partner with private sector entities to deliver public infrastructure and related services usually over a long-term with the private sector partner assuming substantial risk[i]. In order to engage a private sector partner, Government prepares the project through the conduct of feasibility studies and prepares procurement document, then invites proposals for the projects from interested private entities using a competitive procurement process. However, private parties can also submit proposals without any request from Government to provide public infrastructure and related services through unsolicited proposals.

A good number of people reading this article may have come across a brilliant and innovative initiative by a Small or Medium-scale Enterprise (SMEs) and thought that some major national infrastructure gap or required public service would be filled or provided if the initiative was adopted by Government. However, for many of such SMEs or startups, the thought of partnering with Government is confusing and daunting.

This article breaks down the process for unsolicited proposals under the PPP Act for easy understanding and makes a case for SMEs to be proactive in solving public infrastructure problems through such unsolicited proposals.

Unsolicited Proposals

Under Ghana’s PPP Act, an unsolicited proposal is a proposal made by a private party to undertake a partnership project and is submitted at the initiative of the private party rather than in response to a request for proposal by a public sector entity. Thus, an unsolicited proposal is considered a private sector-led proposal.

Preliminary requirements for PPP Projects Initiated by Unsolicited Proposals

There are three (3) requirements for PPP projects initiated through unsolicited proposals. These are:

1. The PPP project must be innovative and not place an onerous obligation on Government.
2. The PPP project must be a project that is not already part of the Medium Term Development Plan of the public institution that the private entity is seeking to partner with; and
3. The PPP project proposed must be consistent with the overall National Infrastructure Plan.

Figure 1 Summary of Preliminary Requirements

Even though dictated by law, the writer is of the view that it should be possible for unsolicited proposals to be submitted for projects in the Medium Term Plan and National Development Plan. The focus must be on the innovation that the proposed solution offers. This avoids instances where projects, though urgently needed, are never implemented for many years due to lack of resources from Government. Government should be open to consider unsolicited proposals.

Notably missing from the requirements above is the fact that the scale of the product or services rendered by the private party is not a condition precedent for consideration of a PPP project through unsolicited proposals. Thus, there is an opportunity for SMEs or startups to submit unsolicited proposals under the PPP Act.

Once the above criteria are met, the PPP Project will go through processes prescribed under the Act including a feasibility study before final approval by the relevant government entity that will undertake the project.

Advantages of Unsolicited Proposals

The use of unsolicited proposal to execute public project confers a number of advantages on the private party, Government and the public including:

1. For the private sector, PPP projects through unsolicited proposals provide a great platform for private sector companies to see their innovative solutions to complex national problems roll out on a nationwide scale.
2. Also, the private sector and public entities avoids lengthy procurement processes to implement projects more quickly. Government is able to catch up with the ever increasing demand for infrastructure and related services through the adoption of a faster procurement process that is well balanced with ensuring value for money and related issues.
3. For Government, the projects that Government does not have the needed resources to implement, can be implemented through unsolicited proposals especially those of a commercial nature for which user changes make economic sense. The Government is able to focus limited resources on other projects mostly of a social and non-commercial nature.
4. Unsolicited proposals are a good avenue for overcoming the Government’s lack of (financial and human) to identify, prioritize, prepare and procure projects.
5. Unsolicited proposals enable the Government to address its inability to plan and fund necessary infrastructure development.
6. Government is able to tap into the private sector’s innovation and knowledge to identify value-for-money project solutions through the adoption of unsolicited proposals.
7. The public gets the needed infrastructure and related services with all its attendant economic and social benefits.

Challenges with Unsolicited Proposals

In spite of the many benefits of unsolicited proposals to both Government and the private sector, PPP projects initiated through unsolicited proposals come with challenges including:

1. Perception of Corruption: Perhaps, the most notable among such challenges especially in this part of the world, is the challenge of balancing the need to address infrastructure needs with the private sector’s motive to make profit and the attendant adverse perception of corruption.
2. Unsolicited projects can divert government attention from systematically planning infrastructure, especially in developing countries where there is a plethora of infrastructure needs each screaming for immediate attention. This is because, while Government may have a holistic approach to infrastructure plans, a private entity has no such objective.
3. There is also the possibility of not getting value for money since the process for unsolicited proposals is less competitive compared with a Government invitation to interested parties to submit proposals.
4. Due to profit motive of the private sector, the high rate of return may affect financial viability of projects. To deal with this, the private party may request for viability gap funding, tax exemption and other government financial support.
5. User Affordability: related to the above, user charges proposed by the private party may be high and above acceptable levels for the general public or users of the infrastructure and related services.

Recommendations

To overcome the challenges, the following are recommended:

1. Government’s clear policy for unsolicited proposals must provide steps and timelines for management of unsolicited proposals, covering minimum submission requirements; reimbursement and protection of intellectual property; procedures for introducing competition and reward systems and eligibility and types of Government support, if any. The PPP Act has attempted to address this by providing various checks and balances with respect to the procedure for the approval of unsolicited proposals. However, there is an absence of clear guidelines for PPP projects based on international best practices. Hopefully, the enactment of the PPP regulations would fill this gap.
2. Government must build institutional capacity particularly for public sector agencies with the requisite skill for managing unsolicited proposals including; conducting feasibility; designing and implementing clear guidelines for the assessment of fiscal risks and liabilities; evaluating proposals, drafting and negotiating PPP contacts as well as monitoring implementation. Where the required expertise is absent in-house, transaction advisors should be engaged.
3. Government agencies must ensure that they are getting value for money. If more than one private sector entity propose similar PPP projects, the proposals must be vetted objectively. It is expected that the Public Private Partnership Regulations would outline a procedure for unsolicited proposals that will balance the need to strictly vet unsolicited proposals with the goal of encouraging innovative projects from the private sector to address national issues.

Conclusion

A fast paced development is dependent on both private sector initiative and government effort. The private sector has been touted as the engine of growth. Unsolicited proposals offer a great opportunity for private sector entities to propose and undertake projects that not only fill the infrastructure gap, but also accelerate development. While government must embrace this option and build institutional capacity and provide clear guidelines that encourage private sector parties to take up the opportunities, the private sector must proactively begin to put their innovations to use by proposing solutions to public entities and implementing those proposed solutions in partnership with public entities not only for their mutual benefit, but for a broader public good and development.

The government continues to be the biggest spender in terms of procurement of goods, works, and services. The government also remains the main provider of infrastructure and related services including roads, health facilities, sewerage and sanitation infrastructure and services, sports facilities, and residential and commercial facilities among others. All these are funded from public funds which are mostly revenue generated from taxation and national resources. The general inadequacy of public funds to finance the needed public infrastructure and services through public procurement requires an alternative approach to financing the delivery of public infrastructure and services. Public Private Partnership (PPP) arrangements provide the alternative and offer great business opportunities to private sector businesses.

In light of this, the passage of the Public Private Partnership Act, 2020 (Act 1039) (PPP Act) and providing the legal framework for PPPs must not only be welcomed but also be of great interest to private businesses. The PPP Act replaces the National Policy on Public-Private Partnerships, which was adopted in 2011.

What is PPP?

Public Private Partnership (PPP) refers to the broad range of contractual arrangements by which public sector entities pursue economic or commercial activities by partnering with private sector entities usually over a long term. The PPP Act defines PPP as “a form of contractual arrangement or concession between a contracting authority and a private party for the provision of public infrastructure or public services traditionally provided by the public sector, as a result of which the private party performs part or all of the infrastructure or service delivery functions of Government, and assumes the defined risks over a significant period of time;”

The figure below summarises the features of a PPP.

Figure 1: Features of a PPP

For an arrangement to qualify as a PPP arrangement or a project to qualify as a PPP project, the following elements must be present:

• (a) One of the parties must be a public entity or an entity owned by government.
• (b) The public entity must seek to partner with a private entity under a contract.
• (c) The private entity must be responsible for providing infrastructure and related services which ordinarily are provided by a public entity.
• (d) The private party must bear a substantial part of the risks associated with the project.
• (e) The main obligations including design, financing, construction, operation and maintenance of the project is performed by the private party.
• (f) The contract is generally for a long term.
• (g) The following entities are listed under the PPP Act as public entities for which a contractual arrangement with a private sector party that satisfies the above requirement will qualify as PPP:

• (a) The outsourcing of government services without the transfer of financial and operational risks to a private party;
• (b) The grant of a mineral right under the Minerals and Mining Act, 2006 (Act 703) or any other applicable enactment on mining;
• (c) The grant of any right for exploration, development or production under the Petroleum (Exploration and Production) Act, 2016 (Act 919) and any other relevant enactment;
• (d) The divestment of ownership or equity of a state-owned enterprise;
• (e) The procurement of goods, works, and services primarily with the use of public funds by any contracting authority under the Public Procurement Act, 2003 (Act 663); and
• (f) Non-commercial activities that are the exclusive preserve of the security services.

Implementation Process

The PPP Act provides that unless a PPP Contract was executed before December 29, 2020, all PPP projects, including the process of contracting, must be in accordance with the Act. The PPP Act regulates the PPP process from start to finish that is: from project identification to procurement of private partners by the public entity to contracting to project implementation.

All aspects of PPP Projects are regulated by the PPP Act as shown below:

The Act sets out the requirements (including approval requirements) for each stage of the implementation process as summarised in the figure below:

• Project Preparation Stage: PPP Projects by nature are generally complex, which is typical of large infrastructure projects. A critical stage is therefore the preparatory stage which entails scoping and describing the project and conducting studies to determine the technical, legal, financial, and commercial feasibility of the project. In view of the conflicting interests of the government entity and private party, there must be a proper framework at the preparatory stage to ensure compliance with the legal requirements, optimum risk allocation and value for money. While the government entity seeks to ensure there is value to the public, the private party seeks to maximize profit. These two interests must be properly synchronized at each stage of the process. As such, the PPP Act requires various steps to be taken at each phase of the preparation stage. This must be followed in sequence with approval granted on completion of the phase.

The PPP Act requires that upon completion of the preparatory stage, the Finance Minister must issue a Seal of Quality prior to the government entity proceeding to the next phase which is the procurement stage.

• Procurement Stage: the next stage upon completion of the preparatory stage is the preparation of relevant procurement documents and launching the procurement process to engage the private partner. A two-step procurement process is recommended under the PPP Act – the pre-qualification stage and the actual proposal stage. At the qualification stage, the government institution will publish invitations for applications to prequalify indicating the minimum qualifications required to shortlist private entities to subsequently submit proposals. If the PPP is to be partly funded by the government entity, the government entity must also obtain written confirmation from the Finance Minister of the availability of funds for the implementation of the project. Upon shortlisting qualified entities, a request for proposal is issued to the shortlisted entities who then are to submit a proposal- both technical and financial- for evaluation. On receipt of proposals, an evaluation committee is set up which evaluates the proposal. The report of the evaluation committee must be approved prior to giving notice of intention to award to the winning bidder
• Contracting Stage: upon approval of the evaluation report, a negotiation committee is set up by the governmental entity to negotiate with the selected bidder on the technical and financial terms of the project agreement (that is the PPP Contract). A negotiation report is prepared by the negotiating committee and submitted to the Finance Minister and the oversight Ministry to enter into the PPP arrangement. Upon accepting the terms, the contract must be submitted for approval by the PPP Approval Committee. Where the conditions in the 1992 Constitution are triggered, the contract must be submitted to Cabinet for approval after which it must be laid before Parliament for parliamentary approval.

The government entity can only execute the contract upon obtaining all required approvals.

• Implementation of Contract: this stage comprises all the post-execution activities undertaken by the parties to the PPP contract including:
• (i) achieving financial close,
• (ii) design of the project,
• (iii) undertaking the construction, testing, and completion,
• (iv) operation and maintenance and
• (v) collection of user charges.

These obligations are generally undertaken by the private party. The government contracting entities also perform obligations imposed under the PPP Contract. This may include providing a guarantee to secure funding, acquisition of the required land, grant of permits, or assisting the private party to obtain permits and others. The contracting entity must also monitor the performance of the obligations of the private entity.

The process provided under the PPP Act may be seen as complex and complicated. This may be due to the very complicated and complex nature of major infrastructure projects. This is in addition to the competing public and private interests involved. It is therefore important that both the public and private entities engage advisors to advise on the project structure, undertake the relevant studies, and provide technical, financial, and legal advice on the contractual and procurement arrangements to ensure compliance with multiple laws and international standards. The engagement of a Transaction Advisor is therefore of utmost importance for a successful PPP process.

Business Opportunities

The opportunities offered by a PPP project are numerous. These cover business opportunities to investors, project sponsors, financial institutions, construction companies, consulting companies, suppliers, employment opportunities, and the general rippling economic effects. All these players must therefore be interested in the implementation of the new PPP arrangement.

The government had earmarked a number of projects including projects in the roads, rail, health, social, and ports sectors for implementation as PPP projects.

Conclusion

The global effect of the pandemic has put more constraints on available resources for the provision of infrastructure and related services by governments, particularly in developing countries like Ghana. The infrastructure gaps keep widening and the alternative solution to close the gap may be through the use of PPP arrangements.

Whilst government embraces this arrangement, the private sector, touted as the engine of growth must proactively prepare to take advantage of the opportunities offered by PPP arrangements.

There have been recent discussions or criticism of public entities in respect of award of contracts through sole source procurement. The loudest voice seem to suggest that the use of “sole” source procurement is “unethical”, “illegal” or at the least geared towards manipulation of the process in favour of a particular contractor, supplier or consultant. It was argued by a panelist on a radio discussion that a major reason for the spate and extent of judgment debts awarded against the state is due to the fact that such contracts are awarded through sole source procurement. In another discussion, a panelist suggested that a clear evidence of corruption in public entities is that about 80% of contracts awarded by public entities are done through sole source procurement.  It must be pointed out that no evidence or basis for these assertions was provided for one to verify.

This article is intended to clear misconceptions created by these discussions on the use of sole source procurement. The article discusses:

1. what is “sole” source procurement
2. justification for sole source procurement
3. procedure for sole source procurement
4. approval required for sole source procurement
5. the role of the procurement entity and the contractors, suppliers or consultant  

It is important to emphasize at this stage that this article relates only to procurement under the scope of the Public Procurement Act, 2003 (Act 663) (the “Act”). Further, it should be clarified that even though the term “sole” source is commonly used, the terminology used under the Act is “single” source procurement. However, the article adopts the common term “sole source”.

What is Sole Source Procurement

The Public Procurement Act prescribes for a number of procurement methods for the procurement of goods, works and services. The Act makes competitive tendering the default procurement method for procurement by entities. Therefore, the use of any procurement method other than competitive tendering is subject to justification and approval. Competitive tendering may either be international or national competitive tendering.

The other methods of procurement that may be adopted subject to justification and approval are:

1. Two-stage tendering
2. Restricted tendering
3. Single–source procurement
4. Request for quotation.

Sole source procurement is, therefore, one of the methods of procurement provided for under the Act for the procurement of goods, works, and services. It is a method of procurement where goods, works or services are procured from a single source (without a competitive process).

The Act permits and provides for the use of sole source procurement subject to conditions or circumstances prescribed under the Act. The use of sole source procurement per se is, therefore, not illegal, and does not necessarily imply any unethical or corrupt activity on the part of the entity employing such method.

However, it is admitted that sole source procurement is more likely to be abused (in comparison to competitive procurement methods) because of the absence of competition. There are, however, measures provided under the Act to minimize the occurrence of such abuse. These safeguards are the prescription of:

1. clear circumstances or criteria where the use of sole source is permitted.
2. procedures to follow
3. approval required for the use of sole source.

Criteria For The Use Of Sole Source Procurement

The Act prescribes seven (7) circumstances where an entity may employ the sole source procurement method. These are:

• Availability of goods, works or services from one source – an entity is permitted to engage in sole source procurement under this circumstance if two conditions are satisfied:
• The goods, works or services are available from only one particular supplier or contractor, or only one particular supplier or contractor has exclusive rights over the goods, works or services; and
• (There are no reasonable alternatives or substitutes available.

If these two conditions are satisfied, the entity is permitted under the Act to employ the sole source procurement method to procure the goods, works or services. Illustration: a public entity seeks to purchase decoders that broadcasts cartoon network for all nursery schools in Ghana. If the decoder is available from only one entity or only one entity has the exclusive right over the decoder with a cartoon network channel, then the first condition is satisfied. The second condition that must be satisfied is whether there are reasonable alternatives or substitutes to a decoder with cartoon network channel. In this case, if there is another supplier of decoders with channels that broadcast animated videos, (example; boomerang, cartoonito) then the question of the second condition must be considered. In that case what is reasonable alternative or substitute is a question of fact (not law) depending on each particular circumstance.

(2) Urgent Need of Goods, works or services – under this circumstance, three conditions must be satisfied:

• There must be a pressing need for the goods, works or services;
• The urgency must not be as a result of acts/omissions on the part of the entity; and
• The use of any other tendering process is not practicable due to unforeseen circumstances giving rise to the urgent need.

Illustration: where the Republic is sued in Court, and the Attorney-General’s Department has no capacity and intends to engage a private law firm to defend the country, that may qualify as urgent need for the services under this criterion.

(3) Urgent Need Due to Catastrophic Event – this circumstance is closely related to (2) above. However, under this circumstance, the following conditions must exist:

• There must be a catastrophic event;
• Due to that event, the goods, works or services are urgently needed;
• No other method of procurement can be employed due to the time involved in using those other methods.

The main difference between (2) and (3) above is that the circumstance under (3) is restricted to catastrophic events and there is no requirement as to whether the act/omission of the entity contributed to the urgency. This situation permits the procurement of goods, services, or works in the event of a disaster. Illustration: where there is a devastating flood that requires an urgent supply of necessaries to a community, that may be done under sole source procurement under this criterion.

• where the entity determines that additional supplies need to be procured from that supplier or contractor because of standardization;
• where the entity determines that there is a need for compatibility with existing goods, equipment, technology or services, taking into account the effectiveness of the original procurement in meeting the needs of the entity;
• where the entity determines that the limited size of the proposed procurement in comparison with the original procurement justifies.

• Balance of payments position and foreign exchange reserves.
• Countertrade arrangements offered by suppliers or contractors.
• Local content
• Economic – development potential
• Encouragement of employment and reservation of certain production for domestic suppliers
• Transfer of technology
• Development of managerial, scientific and operational skills

Where sole source procurement is adopted to promote any of the above policies, the Act requires that there should be a public notice and time for comment prior to the entity procuring goods, works or services using sole source procurement.

The above circumstances are the instances where the Act permits the use of sole source procurement. The use of sole source procurement is, therefore, only permitted if one of the above circumstances exists. For that reason, it is advised, that a private entity seeking to secure a contract under a sole source procurement method satisfies itself of the existence of any of the above circumstances. Even though it is the responsibility of the procurement entity to ensure that one of the above circumstances exists, the private entity entering into such a contract must also ensure the Act is complied with. This is because of the general principle under Ghanaian law that a contract tainted by illegality may be set aside by the court or declared void.

Procedure For Sole Source Procurement

The Act provides that to use sole source procurement method, the entity must:

1. Invite proposal from the service provider; or
2. Request for quotation from the single contractor or supplier.

This implies that the entity must be satisfied with the proposal or quotation provided by the single service provider, or contractor or supplier respectively. This further implies that the proposal must be evaluated, and if required, there must be a negotiation with the supplier or contractor prior to execution of contract. In order to ensure these are done, the Public Procurement Authority (PPA) requires the entity to undertake a value for money assessment and ensure that the entity will get value for the money to be expended on the procurement of the goods, works or services.

The Guidelines issued by the Ministry of Finance and Economic Planning to guide the use of sole source procurement to procure goods, works or services requires institutions to provide information that satisfy the following:

1. Capability and qualification of the proposed firm; and
2. Conditions of contract and financial proposal.

On the capability and qualification of the proposed firm, the institution must provide detailed information and demonstrate that the proposed supplier, consultant or contractor possesses the required experience and capability to carry out the work. The information should include the following:

1. Name of the proposed firm
2. Professional and technical qualifications and competence
3. Financial resources
4. Equipment and other physical facilities
5. Managerial capability, reliability, experience in the procurement object, and reputation
6. The personnel to perform the procurement contract
7. Evidence that the firm has the capacity to enter into the contract
8. Evidence that the firm/entity is solvent, not in receivership, bankrupt or in the process of being wound up, does not have its business activities suspended or is not a subject of legal proceedings that would materially affect its capacity to enter into a contract.
9. Evidence that the firm/entity has fulfilled its obligations to pay tax and social security contributions and paid compensation due for damage caused to property by pollution.
10. The corporate entity has no director or officer who has in any country been;

• Convicted of any criminal offence relating to their professional conduct or making false statements or misrepresentations as to their qualifications to enter into a procurement contract within the last ten years; or
• Disqualified pursuant to administrative suspension or disbarment proceedings.

Even though the Guidelines require the evidence to be provided by the procurement entity to the PPA, it is for the entity, based on information made available by the supplier, contractor or consultant, to satisfy itself of the capability and qualification of the firm prior to submission of such evidence to the PPA for approval.

The submission of conditions of contract and financial proposal is to ensure cost effectiveness, and favorable contractual terms and conditions under the procurement contract. This requires that information is provided on:

1. Detailed cost of the proposed procurement
2. Demonstration that the proposed cost represents value for money. The Guidelines providethat this can be done by comparing the proposed cost with recent similar projects carried out through competition, or by comparing the proposed cost with available national and international standards.

Proposed draft terms and conditions of contract, which as much as possible must be consistent with agreed international terms.

The entity procuring under the sole source procurement method must therefore request for, obtain and evaluate the financial proposal of the supplier, contractor or consultant. The parties (procurement entity and supplier, contractor or consultant) must agree on the terms and conditions of contract which must be consistent with terms generally included in contracts of that nature. Above all, in the evaluation of the proposed cost, the procurement entity must undertake value for money assessment. A proper value for money assessment will ensure that the entity obtains the maximum value or benefit from the procured goods, works or services in comparison to the resources to be expended.

The essence of this procedure is to ensure that:

1. The firm is qualified to perform the contract
2. The firm has the capacity to enter and perform the contract
3. The firm has the resources required to perform the contract
4. The firm is in compliance with relevant laws
5. The terms and conditions of the contract are favorable to the procurement entity.
6. There is cost effectiveness and the use of sole source procurement does not result in higher cost than would have been incurred under other methods.

Approval

The PPA is established under the Act to ensure compliance with the Act. As part of its function, the PPA is to play the gateway–keeping function to ensure that sole source procurement is used in accordance with the Act. The use of sole source procurement method is therefore subject to the express approval of the PPA. It is in the light of this that the Guidelines issued on sole source procurement require the entity to submit information or evidence to the PPA on the following:

1. Justification under the Act for use of sole source procurement method
2. Capability and qualification of the proposed firm
3. Conditions of contract and financial proposal

The PPA must therefore ensure that one of the circumstances described above exists to warrant the use of sole source procurement method. It must also ensure that the prescribed procedure is followed or has been followed. This involves evaluating the evidence submitted to ensure that the proposed firm is qualified and has the capacity to perform the procurement contract. In addition, the PPA must vet the financial proposal to ensure that it demonstrates value for money.

Conclusion

The use of the sole source procurement method is prescribed under the Act. Its use is subject to justifications prescribed and procedures stated under the Act as well as approval of the PPA. The use of such procurement method, in accordance with the Act, is not illegal or unethical and does not connote corrupt activity on the part of the entity employing the method.

However, like any other procurement method prescribed under the Act, the process may be abused. It is therefore important that all the relevant stakeholders, including the procurement entity, the contractor, supplier or consultant being engaged, the PPA, and the public at large, have an interest in ensuring the circumstances justify the use, the procedures prescribed under the Act are followed, and the relevant approval is obtained.

More importantly, it is for the private entity (contractor, consultant, or supplier) to ensure the use is justified, the procedure followed, and approval obtained since the procurement contract can be set aside for breach of the law. Procurement entities and private parties must therefore ensure the three (3) main criteria are satisfied and if necessary seek legal advice on the satisfaction to avoid abuse of the law.