CASE STUDY DIVESTITURE IMPLEMENTATION COMMITTEE (DIC) PROJECT The Divestiture Process a. Listing of SOEs to be divested

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CASE STUDY DIVESTITURE IMPLEMENTATION COMMITTEE (DIC) PROJECTThe Divestiture Process a. Listing of SOEs to be divested TheGovernment of Ghana provides the Divestiture ImplementationCommittee (DIC) with a list of enterprises slated for divestiture.DIC opens a file for each such company. All documentation andcorrespondence prepared or received in connection with theenterprise is placed on this file. Enterprises listed fordivestiture are categorized by the Ministry of Finance (principallyon the basis of employee numbers) into small, medium, and large. Inmost cases, the divestiture of large and medium enterprises isoutsourced to consultants. Small enterprises are either outsourced,or divested by DIC. b. Advertisements Bid documents are preparedfor the particular State Owned Enterprise (SOE), and the SOE isadvertised for sale. Adverts should appear in at least 2 leadingGhanaian newspapers each week for 3 consecutive weeks. Adverts mayalso appear in foreign publications. c. Bidding i. Obtaining biddocuments Investors interested in a particular SOE contact thesecretariat, and after filling in an application form, paying anon-refundable bid fee (¢1,000 for local investors, and $400 forforeign investors), and signing a confidentiality undertaking, theyare provided with the relevant bid documents. The bid document ismade up of • bid procedures; • a draft sale and purchase agreement;• a memorandum containing the profile of the SOE; • an independentvaluation report (¢ 1,000 for local investors, and $300 forforeigners); • fixed assets valuation report (where sale of assetsis the mode of divestiture); • share valuation report (where saleof shares is the mode of divestiture). ii. Form of bids Investorsbids should comprise of a qualification statement made up of 1.Details about the bidder, including (as relevant): a. the bidder'sfull name, address and contact details; b. details of the bidder'sdirectors and shareholders; c. details of the bidder's existingbusiness; d. financial periods; and 2. The bidder's business planfor the enterprise, including, by way of example: a. plans for thedevelopment of the enterprise (with regard to both itsrehabilitation and, as relevant, down-sizing of expansion) and thetiming of the implementation of those plan; b. intentions withregard to employment, proposed staff training programmes andproposals for staff participation in the enterprise; c. marketingapproach and initiatives proposed for the enterprise, includingexport prospects and anticipated opportunities to expand beyondtraditional or existing markets; d. impact on the local community(particularly where the enterprise has traditionally providedsocial services and/or infrastructure); e. impact on competitionand the regulatory environment; and f. environment impact; 3.Confirmation that the offer for the assets or, as the case may be,shares of the enterprise is not subject to any conditions; a. anyimportant points of principles arising from the draft sale andpurchase agreement; and b. confirmation that the bidder will complywith the bid procedures. c. The bid procedures must state therequisite contents of the business plan as specifically and clearlyas is possible in the circumstances. The details mentioned in 3above will not be applicable to all enterprises. 4. A price bid. a.the price offered for the assets or, as the case may be, shares ofthe enterprise (clearly indicating the proposed currency ofpayment); b. if the offer is not on the basis of cash in full oncompletion, the precise timing of any deferred payments; c. in theevent of deferred payments, details of the security proposed to begiven; d. a detailed explanation of how the bidder intends tofinance the acquisition. In the case of an offer made from existingresources, the bidder will be expected to provide writtenconfirmation from its bank or financial adviser that the necessaryfunds will be available. In the case of an offer not made fromexisting resources, the bidder will be expected to provide writtenconfirmation from its arrangers or providers of finance thatarrangements have been made, or will be made, to provide thenecessary finance; and 5. Confirmation that the bidder has notdone, and will not do, at any time any of the following: a.communicated to a person other than DIC the amount or approximateamount of the price offered (other than in confidence to thebidder's advisers); b. entered into any arrangement with any otherperson that he shall refrain from bidding or as to the amount ofany price to be offered; c. offered or agreed to pay or give, orpaid or given, any valuable consideration directly or indirectly toany person for doing or having done, or causing or having caused tobe done, any act or omission in relation to the price offered bythe bidder or any other bid . iii. Evaluation of Bids This is a twostage process: • evaluation of qualification statements; and •comparison of price bids. DIC opens price bids from only bidderswhose qualification statements DIC accepts. In the event of equalprice bids, preference is given to Ghanaians. iv. Rejection of bids: Bids will be rejected on the following grounds: • received afterclosing date and time; • appropriate fee not paid; • received fromperson who canvassed DIC member; and • received from SOE or a bodyallied to an SOE. Exceptions under which bids may be acceptedinclude where the assets concerned comprise non-industrial land andbuildings, with no on-going business, and the bidding SOE requiresadditional office accommodation. d. Negotiations DIC will write tothe winning bidder, and each other bidder, to inform them of theresults of the bid. Negotiations will then start with the winningbidder. Should he fail to satisfy DIC demands, the next highestconforming bidder will be invited to negotiate. e. Approvals AfterDIC Secretariat has agreed the terms of the sale with the winningbidder, the divestiture will be considered by the DIC members. DICmembers, if they are satisfied with the sale, will submit a letterof recommendation to the President's Office for approval. If eitherDIC or the President's Office raises concerns concerning the bid, aletter is sent to the bidder and further negotiations may takeplace. If the President's Office grants the approval, DIC will senda letter to the bidder inviting him to sign the sale and purchasedocumentation. The Executive Secretary of DIC will sign on behalfof DIC and the government. f. Payments i. Mode of Finance Thiscould either be with • investors own resource. or • loan from afinancial institution (DIC may take security over the asset untilfull payment is received). In the case of instalments, for someloans, interest is paid on the diminishing balance. ii. Terms ofPayment Payment could either be • outright, or • by instalments.iii. Payment timing • payment of less than 50% of the priceoffered; or • deferred payment due 3 years after completion. DICprefers outright payment, but will consider deferred payment.Deferred considerations should be secured by a guarantee from abank or other person of sufficient financial standing. If suchguarantee is not available, DIC may consider taking security overthe assets or, shares of the enterprise until full payment isreceived. iv. Interest Interest on deferred payments is as follows:• Ghanaians: relevant Ghanaian Treasury Bill Rate • Non Ghanaians:relevant London Interbank Offer Rate plus 2%. v. DivestitureProceeds This will be paid to the appropriate DIC bank account. TheProposed System The Board of Directors of DIC has received fundingfrom Government of Ghana to commission the development of a robustand user-friendly web-based system that DIC will use for itsoperations. REQUIRED: Part 1: DUE BEFORE MID-SUMMER EXAMS 1.Prepare a comprehensive list of problems that confront the currentDivestiture Implementation Committee (DIC) System and suggestsolutions for each of them. 2. Identify the stakeholders for theDivestiture Implementation Committee (DIC) System, and describewhat each of the stakeholders may be interested in regarding theproposed system. 3. Create and explain a list of opportunities andobjectives of the Divestiture Implementation Committee (DIC) System4. Discuss the data gathering instruments/techniques that you woulduse to elicit the requirements of the proposed system; and indicateclearly how you would use these instruments/techniques 5. Create acomprehensive list of interview questions (arranged into twocategories: questions about processes, and questions about data)that you would ask the management and staff regarding theDivestiture Implementation Committee (DIC) System. 6. Prepare alist of the functional requirements and non-functional requirementsfor the Divestiture Implementation Committee (DIC) System; andjustify them. 7. Construct an Entity relationship diagram for thescenario outlined for the above Divestiture ImplementationCommittee (DIC) System. 8. Perform operational, technical andeconomic feasibility analyses of the Divestiture ImplementationCommittee (DIC) System, and provide adequate justification for it.AP[10 marks] CR(5 marks) AP(10 marks) CR[10 marks] CR[10 marks]CR[10 marks] EV[15 marks] Part 2: DUE BEFORE END-OF-SUMMER EXAMS 1.Discuss the system development methodology that you would adopt forthis project and justify your choice. 2. Construct data flowdiagrams (including a context level diagram, a level 0 diagram, andseveral child diagrams) that show important, representative partsof the Divestiture Implementation Committee (DIC) System. 3.Identify five data files that will be used in the DivestitureImplementation Committee (DIC) System; and construct acomprehensive Data Dictionary for each of the five data files youhave identified. 4. Construct use-case diagrams, sequence diagrams,and class diagrams for the proposed Divestiture ImplementationCommittee (DIC) System. 5. Construct object diagrams, activitydiagrams and communication diagrams for the proposed DivestitureImplementation Committee (DIC) System. 6. Design five reports thatshould be generated from the Divestiture Implementation Committee(DIC) System. 7. Discuss the testing strategies/techniques that youwould use on this project; and provide a table of test criteria andcorresponding test data for the testing. AP[10 marks] CR(20 marks)CR(10 marks) CR[30 marks] CR[30 marks] CR[10 marks] EV[10 marks][Total: 120 Marks]