That Ghana has a housing problem is accepted by all political parties, with the countries housing deficit estimated at 1,000,000 units and increasing by 50,000 to 100,000 each year.
The CPP in its last election manifesto noted wider issues plaguing housing in Ghana:
• Lack of affordable housing both in terms of ownership and rental.
• Exploitation of workers and small business owners by Landlords who continue to rental advances far in excess of the 6months stipulated by law.
• Proliferation of land disputes.
• Unplanned growth of our towns and cities.
• Slum dwellings with high concentrations of crime and poverty.
So what is the NDC government’s solution to the need for affordable housing and all the attendant housing issues – a $10billion deal with a South Korean conglomerate involved in ship building and energy, with less than 5 years house building experience, and less than 10,000 units built to date under its name.
Many now know that the deal involves STX building 200,000 housing units in Ghana over a 5 year period at a cost of $10billion, comprising:
• an initial phase where 30,000 units is built at a cost of $ 1.5 Billion, to government. These are earmarked for the security services, including 15,240 one-bedroom flats and 9,356 two-bedroom flats.
• HFC Bank will provide mortgage finance for the remainder (i.e. 55%), worth over $ 5 billion.
The deal also involves “Grace and Favour” accommodation with STX to construct for the state an additional "300 units on the Build Lease Operate basis to house members of the Parliament, Ministers, State Protocol Department and visiting VVIPS. This at a time when the State is selling accommodation it already has for Ministers and VIP’s.
The $10 billion project depends on a $4.5 billion off-take agreement with Government of Ghana taking off.
An off-take agreement guarantees that a buyer or the GOG purchases future goods produced by the supply company (STX). An off-take agreement ensures that the Seller has a buyer for future goods produced through their operations. Prices are agreed upon at the time of the contract, ensuring that sellers cannot offer a lower price in the future. Buyers use the agreement as a hedge against future prices in case of a future supply shortage. But, details of the cost of construction in this case are missing and thus the value of the Off-take agreement questionable.
Many do not know however that a supposed “Housing” deal gets even more confusing because the Memorandum of understanding notes a wider agenda from STX including:
• STX’s intension to build various plants in Ghana including a cement plant, and a rolling mill.
• The establishment of a Free Economic Zone where the STX plants would be built.
• Permission for STX to operate a port where raw materials can be imported and exported without hindrance.
• Approval for STX to acquire a limestone mine.
• Revamping Tema Oil Refinery’s (TOR) “hardware and operational scheme”, with the Government of Ghana vowing to work jointly with STX to secure stable crude oil supply to TOR.
• Expansion of Refinery capacity with STX building and operation of Oil Tank Terminals.
• STX involvement in shipping, logistic transport business, shipbuilding of commercial and specialized vessels.
• STX establishment of wind farms in Ghana.
Many Ghanaians have seen in this STX deal symptoms of a far bigger problem which 18 years of NPP and NDC rule has bequeath to Ghana:
(a) A dependency culture and addiction to foreign aid.
(b) Outsourcing of the governing of Ghana with Government run not on well thought out programmes but as a series of foreign funded projects - as long as someone funds it.
The NPP and NDC have seemingly come to equate the ability to secure foreign aid and loans as a mark of effectiveness of government, with the role of the President reduced to that of Treasurer of a Charity.
These two parties have emasculated themselves; their policies and programmes are dictated by NGOs and the interests of donors who decide what projects to fund. So that you end up with a grotesque culture in the corridors of power in Accra, where everyone,including government, is always sniffing around for the next foreign funded project where they make their cut. And the projects could be anything from a conference of medical doctors, a meeting of the LOC for 2008 African Cup of nations to capital investment projects like STX.
NPP or now the NDC Government neither has nor owns its own plans for social housing, for enabling cheap financing of homes or even encouraging private sector developers to contribute to an overall housing plan.
The question many are asking is “How does the STX agreement fit into the government’s overall housing policy? , the answer is , it doesn’t because there’s no such policy; NPP or NDC government policy is let’s find any project foreigners will fund and from which we can make a cut.
Government must return to first principles; plan what it wants; identify what resources it can put in and then decide on how much it can borrow or raise on the open market or bilaterally and if there is still a shortfall,
Many have spoken out against the deal including
The Ghana Real Estate Developers Association (GREDA) who were “extremely disturbed” by the nature of the whole STX deal, and the Off-Taker Agreement between STX Engineering and Construction Ghana Limited and the Government of Ghana, pointing out that :
1. This deal does not at all represent value-for money.
2. Shrouded in ambiguity.
3. All land will be provided by government free of charge to STX.
4. All facilities to the land such as Roads, Electricity, Water, Telephones and the like will be provided by government free of charge to STX.
5. No Taxes on all imports, including materials, machinery and equipment..
6. No Taxes on all earnings by STX.
7. No VAT 5. No withholding taxes may be deducted even for locally purchased items.
8. Full repatriation of profits and earnings for STX.
9. Ghana Government will pay for STX costs and expenses in executing the project under the “Financing Documents” (including legal, accounting, travel expenses, and other out of pocket expenses) and any VAT on those expenses.
10. STX may, if it wishes, convert all or part of the debt into Crude oil.
11. We also wish to reveal the false impression being created that this project is being funded by the Korean government. There is nothing in the agreement which states this. What is evident is that STX will obtain a sovereign guarantee from the Ghana Government.
12. That GREDA is able to construct any type of building required in Ghana.
13. Ghanaians built Dansoman, Sakumono and other estates, and all the barracks we have today. Ghanaians built the city of Tema, State House (Job 600), and Cedi House, local private estate developers have built world Class residential properties.
“GREDA commits that given the same terms as STX, it can deliver the required housing at less than half the current cost.”
GREDA has stated further that STX has not provided any basis for pricing the units, it has not revealed the location of the project and other important facts, which will enable a professional compute the cost of a building, we therefore request that they put that information out.
NDC Ministers say they had done their due diligence checks but the issues around STX and indeed Korea itself give reason for caution:
• STX Corporation, the parent conglomerate, has notable liquidity issues although can certainly raise money on an off-take agreement backed by a sovereign guarantee and oil, as the agreement with the Ghanaian Government offers. They STX had only managed to supply to the Finance Committee of Parliament woefully inconclusive evidence on sources of funding.
• STX Engine,is also currently under investigation in Korea for inflating contract prices.
• STX, has only recently entered the house construction market, after registering the housing side of the construction arm of the business in 2006. In 2007, STX won a total of 299 housing units contract. It was in 2008 it won a contract in Bachegou, China, called the STX Dalian Housing project, involving 27,900 housing units. It has been given 8 years to complete that project.
• South Korea, which relies on exports, suffered a US$8 billion current account deficit in 2008.
• Initial Suppliers' Credit Facility of $1.5 billion for 30,000 housing units for our police officers and others would be paid by Government but Government would have no control over the money.
There is also an issue about “Local Content” but the only local content STX is currently talking about is on the consultancy side with an MOU agreed with KNUST, dealing with architectural designs, planning layouts and engineering services, as well as quantity surveying and construction supervision.
The CPP’s manifesto proposals before the last election involved:
1. Passing a revised Rent Act to help alleviate the suffering of workers and small businesses.
2. Work with the Building and Road Research Institute, the Ghana Real Estate Developers Association and other stakeholders in the housing industry to provide low cost technologies for building high quality and high capacity homes and apartments across the country.
3. Promote the development of the mortgage industry to increase the rate of home ownership in the country.
4. Strengthen the role of the State Housing Corporation in the provision of affordable housing throughout the country including rural areas.
5. Work with the Ghana Institution of Engineers and other relevant private and public bodies to improve standards and quality in the construction industry.
6. Remove tax holidays for high-end housing markets and provide tax incentives for mass-occupancy affordable housing for workers.
The CPP wishes that the NDC and NPP would start believing in Ghana and Ghanaians as the CPP had done in building and developing the infrastructure of Ghana in the 1950’s and 60’s.
The President may have pulled the plug on this deal and asked for a rethink on this , but the STX deal is already the writing on the wall for the NDC.
God Bless our homeland Ghana
CPP International Communications Directorate