Embattled businessman Alfred Woyome wants to refund the GH¢51.28 million judgment debt he received in 2010 over a three-year period, but Starr Business has analysed how much the state would have earned if the booty paid him was invested.
Mr. Woyome sued the state over an alleged breach of a purported contract between him and the Government and was awarded a GH¢51.28 million judgment debt.
After a protracted legal battle, Mr. Woyome was asked to refund the money paid him by the State.
At the last court hearing counsel for Mr. Woyome, Ken Anku argued that his client could not refund the money by December 31, 2015 as he had earlier promised because all his accounts were frozen by the state during criminal investigations into the payment of the money.
He told the court he could pay GHS8 million by the end of April 2016 and spread the remaining GHS43 million in three years.
The head of Business Desk at Starr FM, Kweku Temeng, sought to find out how much anyone who was handed a GH 51. 28 million in year 2010 will be earning if he decided to invest in a 91-day Treasury Bill between January 2011 to December 2015.
ANALYSIS
• Analysis assumes an investment horizon beginning from 1st January 2011 to 31-December 2015 when refund was expected due to a court ruling for same. This gives a 5-year investment horizon.
• Money could have been invested across various investment instruments, but analysis assumes a single investment instrument, the 91-day Treasury bill.
• Choice of the 91-day was based on the fact that it tends to serve as a benchmark for interest rates determination in Ghana.
• Allow for a re-investment of principal plus interest each year since the government had frozen the assets of Mr. Woyome over the period.
Quick Commentary
Let us retrace our steps to 31st December 2015. It was the set date for the full refund of the GH¢51.28 million paid to business man, Alfred Agbesi Woyome, over 5 years ago (sometime in 2010). While refund of the GH¢51.28 million would have eased some concerns, it definitely would be much less in value terms, unless it is repaid with interest sufficient to cover the loss of value over the last 5 years (due to inflation effect). At least, so says the time value of money!
Lest we forget, this is the last month in the first quarter of 2016, a first instalment of the GH¢51.28 million is yet to be paid.
However, a very important question appears to have been missed by all the calls for the refund.
How much could have been earned on the GH¢51.28 million had it been invested in an investment instrument over the past 5 years? Given that no one appears to be demanding refund together with interest, could this be a cool business deal for the rational business man, Mr. Woyome, even if he refunds all the GH¢51.28 million?
Well, I pull out my calculator for a rough but simple estimation of return on fixed income investment in Ghana over the last 5-years from 2011 to 2015 with the following simplifying assumptions:
The result obtained was intriguing and begs the question whether or not the repayment should be accepted without interest.
Given the average annual interest rates on the 91-day from 2011 to 2015, investing a principal amount of GH¢51.28 million (with a re-investment option of principal plus interest each year) would yield an estimated GH¢76.08 million, added to the principal the investor should be taking home GH¢ 127 million.
