THE $10 BILLION STX HOUSING CONTRACT: GOVERNMENT MUST TREAD CAREFULLY ON THIS VERY BIG DEAL!
It is because I have written extensively on real estate issues in Ghana that I feel a sense of duty and obligation to write on this subject. In a previous article titled, “The job-creating machine called the real estate industry in Ghana” Read Article (30-06-2010), I have established beyond doubt the multiplier economic effect real estate development creates in any country. There is no question that the industrialized nations of the world today were built on the back of extensive real estate development. It was the construction industry that built America in its formative years and turned it into a very powerful nation over the years. It is in this same spirit that I welcome any attempt by any government in Ghana, NPP, NDC, CPP, PNP or whatever party, to solve the one million housing deficit we have in our country today.
To me, the attempt by the current government to build 200,000 houses in Ghana is welcome news indeed. Can we imagine for one moment the number of jobs this could create in Ghana, let alone the impact on so many other industries in our country? A $10 billion investment overall in an economy like ours is a big deal indeed, and could stimulate our economy extensively for years to come. On face value, this looks very, very promising indeed. However, it is when you look at the fine print in this whole proposal that you start feeling very queasy and uneasy about the whole deal. It is the freebies and the giveaways our government is offering to procure this transaction that make it very worrisome indeed. Here is the list of government giveaways:
1. A Ghana government sovereign guarantee to enable the Koreans go to the world capital markets to raise funds for the project. What this simply means is that the Koreans currently don't have $10 billion of their own money to invest in our country. Our government has to give them the guarantee to go raise that loan which we could be stuck with if they could not pay back to their investors. Why couldn't our government offer such similar facility to a consortium of Ghanaian real estate developers who have established a track record of building fine houses in our country? Ghana was very successful in raising $750 million on the world capital markets previously. Why couldn't we make similar efforts on the housing front? Why not?
2. Our government is offering free land to the Koreans from government land banks. Is our government equally willing to be that generous to local real estate developers? How come for all these years no government in Ghana has done so for our local real estate developers who have toiled for years without much government support? Where is the doctrine of equal opportunity for all? Or are we still stuck in the colonial mentality that anything foreign is always better than our own?
3. The Ghana government will provide free infrastructure such as roads, electricity, water, power lines, telephone lines, etc., etc., to the houses built by the Koreans. Folks, AT NO COST TO STX! Has anyone at any of our ministries done a cost analysis of all this to find out how much extra cost this will be to our government? Have we? Will our government readily offer this freebie to a consortium of Ghanaian real estate developers too?
4. Unconditional import duty and income tax exemptions for STX and their expatriate contractors and staff – are we willing to do this for our fellow Ghana real estate developers and their employees too?5. Unconditional VAT exemptions on materials STX and their expatriate contractors and staff will buy locally in Ghana. How come we have not done so yet for local estate developers to stimulate our own economy?
6. A full 100% profit repatriation for STX and its employees on all their projects in Ghana. What a sweet deal Ghanaian real estate developers will die for!
7. Under the “Financing Documents section of this deal the Ghana government will pay such expenses as travel, legal and accounting fees incurred by the Koreans in the execution of the entire project for their length of stay in Ghana.
8. An off-taker agreement that guarantees the Koreans that every house they build will be purchased by the Ghana government. Quite an iron-clad guarantee Ghanaian real estate developers will die for in these turbulent economic times!
Let me state categorically here that I am not interested in the politics of this STX housing deal. Far from it! I am a real estate professional and my interest is in how beneficial this real estate project is for our country, Ghana. I would caution that we approach this whole deal carefully, do a thorough cost-benefit analysis by independent professional experts and not rush this thing through parliament only to regret later. Let's not get bamboozled by a Korean government who are quietly gunning for our oil prospects, arm-twisting us, and using our housing deficit as a front to achieve their goals. Politicians are notorious for seeing sensitive economic issues only through the political prism and blinding themselves to the stark realities their decisions could inflict on the economies of their own countries. They may achieve bragging rights for the next election but it is the people of Ghana who get stuck with the bill in the long run. We've seen this movie before. Ask the United States of America why their country is hemorrhaging today and they will tell you plainly. If STX builds 200,000 houses for Ghana, our country will still be 800,000 houses short. Is the government of Ghana willing to give local developers equal treatment and the same freebies listed above for the remaining 800,000 houses? Is the government willing to? Will they do it? Can you imagine how much that would stimulate the Ghanaian economy if they did? Eight-hundred thousand houses?
I have visited the offices and projects of a lot of real estate developers in Ghana and I feel proud to be in such august company and write proudly about it. Why our own governments won't promote our own people in the real estate industry bothers me greatly. Can't we learn from the recent refusal of visas by the US government to some of our ministers in the Cosmos oil deal involving the US conglomerate, ExxonMobil? The US will do everything to promote American companies first before anybody else, but in Ghana it is the reverse! Most of the Ghanaian developers have all told me: “FINANCING is our biggest problem! Seriously, by this STX deal, the government of Ghana is simply creating the blueprint for Ghanaian real estate developers to DEMAND EQUAL OPPORTUNITY from future governments. Let's not rush into this. Let's tread carefully on this deal. I hope the powers that be are listening!
Peter Atsu Tsikata
Real Estate Consultant
Millennium Properties Ghana Ltd
Web site: www.millenniumtoday.com