What Koraaa Is Wrong With Us?

On June 23, a Dr Kwarteng posted this on the website of the Statesman in response to a report on the controversial $10 billion STX housing deal.

It reads: “This marks the end of Ghana. At BRRI [Building and Road Research Institute], we have been researching into affordable housing for over 25 years now.

We have many solutions on the shelf, but Government has never given us the funding needed to commercialise the projects... So what at all is wrong with Africans?”

Last week, I was in Parliament and walked in on a Finance Committee deliberation on a 17 million euro credit facility. Well, I was able to walk in unannounced because the all-important committee sessions of the Parliament of the Republic of Ghana take place in an open place, at the lobby.

Mind you, it is at the committee level that serious work is supposed to take place, where some $1 billion worth of loans are routinely discussed and approved sotto voce each year, before it is brought to the whole house.  

A heated debate ensued between the Majority members and Minority members on the committee, with the latter accusing the former of rushing through an agreement, details of which were still sketchy.

The 17.7 million euro loan facility from BNP Paribas to Government is for a sole sourcing contract for the supply, installation and operation of Vessel Traffic Management and Information System (VTMIS).

What some committee members were finding most worrying but which seemed quite normal to the others was that they were being asked to okay a deal without parliament doing any serious value-for-money comparative analysis.

They were not experts and were not furnished with any independent expert reports on what such a VTMIS project should cost Ghana and whether or not this was the best deal available. But, hey, the terms of the loan sounded good!

From the little that the Danquah Institute has studied and continues to study, what is coming out clearer and clearer is that contract sums are usually woefully inflated and later on cushioned by a 30-something percent grant element and a meagre percentage interest rate to make it appear concessionary. So long as the terms of a loan are concessionary, nothing else matters.

A typical example is the Jubilee House project, the defence then was that it was being financed mainly by an Indian government grant. 

Yet, in the end, government ended up paying or committing funds more than twice the value of the grant received for a building which Ghanaian built environment players could have done at presumably half the cost, with very little national security implications of another sovereign nation having the full engineering details of our sovereign presidential palace.

The naked truth is that Ghanaians are being screwed big time and certainly not by their spouses or lovers and with no attempt on the part of those doing the screwing to resort to the use of protection.

The hottest such deal in town is the biggest credit facility ever entered into by any government since 1957.

There is only one fundamental question to ask: How could the Minister of Finance & Economic Planning, ably supported by the Minister of Water Resources, Works & Housing, present to Parliament for approval a $1.5 billion supplier's credit facility for 30,000 housing units, when the project contractors themselves, STX, did not have a clue what the designs were to be, where the actual sites were to be at and what a unit cost of the housing project would be?

Mind you, this is a credit facility with a peculiar doubling of fees. For example, the VTMIS loan had just a single 0.5% arrangement fee.

The STX credit deal, on the other hand, has an Arrangement Fee of 0.75% and a superfluously nomenclatured Management Fee of another 0.75% of the facility.

This adds up to $12.5 million extra cash to help STX in arranging and managing a credit facility which STX now assures us is being fully funded by the Korean government! No wonder the NPP suspects this to be a corrupt deal. But, if it is corrupt then it is far bigger than the M&J scandal to which the NPP is comparing STX.

The haste in getting Parliament to approve a deal that some very basic preparatory work has not been completed is what makes some of us view this deal with utmost suspicion.

No adherent of Danquah's property-ownership philosophy can say no to the principle of this project even if it carries with it some political inconvenience.

Beyond that, after all, how many Ghanaians care who is building them homes so long as it is decent, available and affordable? Who cares if a foreign company intends to build 200,000 homes in Ghana and wants to price them above the means of 80% of Ghanaian workers?

Normally, we would not; but if there are issues about value for money and Ghanaians (through the Government of Ghana) are being asked to fork out a total of $4.5 billion later (or $1.5 billion now), then we have to ask some relevant questions. So long as Government money is funding it, we should make sure it is spent rightly.

For example, how could Parliament be asked to approve such a record credit sum for a project when the necessary contractual arrangements for the joint venture, the EPC agreement and other related matters, are yet to be negotiated and drafted? So, on what basis did STX come about that figure of $1.5 billion?

My hunch is this: STX is likely to make a cool $300 million from this 30,000-unit project, after which they would simply pack bags and leave, blaming Government for breaching its contractual obligation in the joint agreement.

To appreciate this fear of mine, you have to look at the details of the off-take agreement between STX and Government of Ghana. Let me just quote from the recital of that agreement signed by Albert Abongo and inherited by Alban Bagbin and supervised by John Mahama.

It reads: “ (i) Whereas the Government of Ghana (GoG) intends to initiate a housing development project (Housing Project) whereby (1) over the next five (5) years, 200,000 housing units will be built in ten cities in Ghana, forty five percent (45%) of which the GoG will become an off-taker to meet some of the accommodation needs of security agencies of Ghana (the GoG Off-Take) and HFC will become an off-taker  (as the principle mortgage finance provider) of the remainder (ie 55%) and (2) 300 units will be built on the Build Lease Operate basis to house members of the Parliament, Ministers and State Protocol Department and visiting VVIPs thereof."

As Dr Bawumia points out in his analysis of the deal, $4.5 billion would mean an annual repayment bill of $400 million.

There is absolutely no way (mark my word) that this government or any other subsequent government would or could honour the entire off-take agreement of 90,000 homes at that ridiculous price.Government has more to do with our money than providing homes which the private sector is already doing.

Now, wait a minute... beyond the 200,000 units, 45% of which Abongo, acting on the instructions of the Mills cabinet, committed Government to buying, the Koreans are being contracted to build an additional 300 luxury village of MPs, Ministers and visiting VVIPS like the Korean President. At the same time, we are busy selling the ones built by Tarzan!

What is interesting about this 300 parliamentary village is the proposal to evacuate the soldiers from Burma Camp and use that prime land for the project. The Koreans have even offered to build a new 'Burma Camp' near Michel Camp.

There is an electoral blackmail going on. The NPP was being warned against opposing the deal because it would lose them friends in the security services since the 30,000 units are for the use of the forces. First of all, at best 6,000 units would be built a year and there is some two years to the next election.

Again, from all the discussions I have heard, no Ghanaian is saying that Government should not provide decent homes for the police, the NPP even made a manifesto commitment to that effect.

What we are all saying is that let us make sure we do so at value-for-money and properly. After all, there are another 8 million voters or so who could also do with accommodation better than what they now live in.

As a memo from members of Ghana's Built Environment points out, “If the houses to be built by the Koreans should be truly affordable, then we need to ensure that the cost is within the income profile of the target group. 

We should be guided by the fact that those in the lower-middle income group and lower income groups may fall within a bracket of GH¢150 to GH¢400 a month of net salary, of which housing expenditure will most likely not exceed 40% of their disposable income. 

Within such estimates, an affordable house should not exceed US$15,000 – US$20,000.”

In that carefully drafted memorandum to the Minister of Water Resources, Works & Housing, stakeholders of Ghana's built environment have raised serious questions about the proposed $10 billion joint venture agreement between STX Korea and the Government of Ghana for the construction of 200,000 housing units between 2010 and 2015.

 In their memo dated June 9, 2010, the Joint Committee of the Ghana Institute of Architects, Ghana Institute of Planners, Ghana Institution of Engineers and Ghana Institution of Surveyors welcomed the bold project but added that Ghanaians don't need Koreans to come and build affordable homes for Ghana.

The memo states, “In spite of the huge economic potential of this investment, there is strong possibility that the real economic benefits of this investment could elude Ghana and rather stimulate the South Korean economy.”

 The stakeholders reminded Government that “As far back as the 1960's, Ghanaians were in charge of large scale housing projects and even built the State House.  Ghanaians fully managed and built Dansoman, Teshie-Nungua Estates, etc. 

We may need technical assistance from South Korea when we need to build an Oil Refinery, Merchant or Navy Ships, Nuclear Plants, etc, but certainly NOT AFFORDABLE HOUSES!”

By the way, I've been told subsequently that the Chronicle story about Kwadwo Mpiani, which I critiqued with some qanawu ruthlessness last week, came out of a discussion not meant for publication. Still, I'm yet to see a retraction on that score in the Chronicle. I hope they do.

By Qanawu Gabby