STC cries out to SSNIT

The Social Security and National Insurance Trust (SSNIT), the majority shareholder of Intercity STC Coaches Limited (STC), has been told to inject equity into the ailing transport company to salvage it or sell it off.

The company, whose debts stand at GH¢40million, has not seen any significant capital injection since SSNIT acquired an 80% controlling stake from VANEF STC in 2001. Government owns the remaining 20%.

“Nobody bothers about STC anymore; it is only the management. SSNIT is not interested in this company; government is not interested, too. In my view, SSNIT needs to recapitalise the company or sell it off to someone interested in running a transport business,” a senior official of the company said in an exclusive interview with the B&FT.

The troubles of STC, which was valued at GH¢7.2million as at 2000, began with acquisition of the company by VANEF.

VANEF, unable pay fully for the stated value of the company by the Divestiture Implementation Committee (DIC) approached SG-SSB bank for a loan to enable it acquire the largest public transport company at the time. SSNIT acted as a guarantor for the loan. Subsequently, the name of the entity was changed from STC to VANEF STC Limited.

Though VANEF operated the entire fleet of the transport company, it failed to pay the loan. This left SG-SSB with no choice but to recoup the loan from SSNIT, the guarantor.

SSNIT in turn, activating a clause in an initial agreement with VANEF, re-possessed the company and re-named it Intercity STC Coaches Limited in 2001.

However, since the acquisition SSNIT has neither injected any significant capital into the company, nor re-structured its finances, operations and administration. This has led to a steady decline in the company’s fortunes and eroding of the company’s working capital, plunging it into a mountain of debt.

The situation is compounded as the minority shareholder -- government -- virtually runs the company with SSNIT assuming a secondary role. In 2008, when the President directed the dissolution of all boards of State Owned Enterprises (SOEs), the board of Intercity STC Limited -- a private entity -- was also dissolved. Subsequently, government appointed a new board for the company.

“SSNIT does not run the company; government rules. [But] SSNIT is not an extension of government. Government appoints board-members and the board chairman. SSNIT has not shown much interest. As a company it owns, auditors of SSNIT do not come around to see the availability of the assets before incorporating them in their books,” the source said

The source added: “It is only when management runs into dire financial straits that SSNIT supports us and treats it as a loan for the company. For instance, we contracted a loan of about GH¢5.5million from National Investment Bank (NIB) to purchase Eicher buses. We could not pay the loan when it was due, so a court ruled that NIB should sell the Takoradi and Kumasi terminals of the STC to recoup the loan. That was when SSNIT intervened and paid GH¢2.5million out of the total sum.”
Direct interference by the board has also led the company down the path of decline, the source alleged.

“The purchase of 45 Faw buses in 2005 is what has brought STC to its knees. We borrowed so much money to purchase the FAW buses, but they did not last for two years. Those buses were not tested and no prototype tried. Under the normal procedure, we were supposed to be given at least two to try out. The company’s engineers were not involved in the purchase of the FAW buses.

“In 2005 when the FAW buses were acquired, STC used to make about GH¢45,000 from the Accra branch alone, and could do 16 services from Accra to Kumasi. For the entire country, we used to make GH¢100,000 per day. Now we cannot do a single service to Kumasi and make around GH¢35,000 for the entire country.”

The fortunes of the once-vibrant transport company now hang in the balance. Its net worth dwindled from GH¢10.9 million in 2000 to negative GH¢6.2 million in 2009, and will continue to remain in the red if not salvaged, the source said.



source:B&FT