SSNIT/Rock City deal: What Okudzeto Ablakwa is keeping away from Ghanaians
SSNIT/Rock City deal: What Okudzeto Ablakwa is keeping away from Ghanaians
In the midst of the controversy surrounding the decision by the Social Security and National Insurance Trust (SSNIT) to divest from six hotels, certain critical details have been overlooked.
The narrative, largely driven by Samuel Okudzeto-Ablakwa of the National Democratic Congress (NDC), appears to misrepresent facts and selectively omit key information, thereby distorting the public’s understanding of the situation.
Firstly, it’s important to clarify that the decision to sell these hotels was initiated in 2012 under the administration led by Dr. Ernest Thompson.
This move was based on a thorough assessment that determined the hotels were non-profitable and thus a financial drain on SSNIT.
Contrary to the misleading claims, SSNIT is not selling all its shares but rather 60% of its ownership in these hotels. This restructuring is part of a broader strategy to manage investment risks and improve returns.
The six hotels in question—La Palm Royal Beach Hotel, Elmina Beach Resort, Busua Beach Resort, Ridge Royal Hotel, Trust Lodge, and Labadi Beach Hotel—have consistently underperformed.
Frequent losses, ongoing maintenance costs, and the need for capital injections have plagued these properties. For instance, La Palm Royal Beach Hotel has incurred losses in 11 out of the past 14 years and has never paid dividends, with an average return on equity of -4.2%.
Elmina Beach Resort and Busua Beach Resort share similar stories, with negative average returns on equity of -4.8% and -31.7%, respectively.
Ridge Royal Hotel has been particularly problematic, with losses in all eight years of its operation and an average return on equity of -33.1%.
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Labadi Beach Hotel stands out as the exception, having made losses in only two of the past 14 years and consistently paying dividends.
However, even its average return on investment has been relatively low, at 1.7% from 2012-2017, increasing to 5.2% between 2012 and 2022.
Given this context, SSNIT’s decision to seek strategic partnerships to revitalize these assets is both logical and necessary.
A steering committee comprising board chairpersons of the hotels, SSNIT board members, and management staff was established to oversee this process.
A competitive tendering procedure was implemented, with advertisements for a Transaction Advisor published in prominent local and international media, including the Daily Graphic, Ghanaian Times, and The Economist.
By the deadline of January 16, 2019, 15 firms had expressed interest. The evaluation committee shortlisted six firms: EY Advisory Ltd, Colliers International, KPMG Ltd, PwC, Deloitte and Touche, and SEM Capital Advisors, with SEM Capital Advisors ultimately winning the bid due to its competitive offer.
SEM Capital led a consortium that brought in expertise in legal, asset valuation, and hotel management. This consortium then guided the selection of a strategic investor.
Following further advertisements, nine companies responded, with six qualifying after the evaluation process.
Rock City Hotel emerged as the top bidder, offering $29.4 million for Labadi Beach Hotel compared to the next highest bid of $18 million from Yaw Addo Development, and $9.4 million from Luxor Hotels Ltd.
Rock City also offered the highest bids for La Palm Royal Beach Hotel ($21 million) and other properties, significantly outbidding competitors.
Notably, Rock City’s bid for Ridge Royal Hotel and Elmina Beach Resort were the only bids received, and they exceeded the recent price valuations for 60% ownership of these hotels.
Rock City Hotel, recognized as the largest hotel in Ghana and West Africa, boasts 1,000 rooms with another 2,000 under development in Kwahu.
Its capacity and expertise present a promising partnership opportunity for SSNIT, potentially turning around the fortunes of these struggling assets.
In summary, SSNIT has followed due process in its decision to offload these hotels. The move is a strategic effort to mitigate losses and enhance returns on investment.
The partnership with Rock City Hotel, given its substantial bids and industry standing, offers a viable solution to the long-standing financial challenges posed by these properties.
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