MINORITY EXPLAIN WHY THEY OPPOSE STX

MP for Afigya-Sekyere West, Mr. Albert Kan-Dapaah (left), Dr. Anthony Osei Akoto, MP for Tafo (middle), Minority Leader, Hon. Osei-Kyei Mensah-Bonsu (right)

By Stephen Odoi-Larbi & Linda Akrasi
MP for Afigya-Sekyere West, Mr. Albert Kan-Dapaah (left), Dr. Anthony Osei Akoto, MP for Tafo (middle), Minority Leader, Hon. Osei-Kyei Mensah-Bonsu (right)

The minority in parliament has launched another blistering attack on the government to diligently review the joint venture agreement between STX Engineering and Construction, HFC Bank and the Government for the provision of 200,000 housing units for Ghanaians, at a cost of US$10 billion.

The group says if the Government of Ghana accepts the terms and conditions in the agreement, the economy would further be plunged into economic difficulty. By so doing, the group added 'it would amount to STX Engineering and Construction getting a free ride on the back of the people and government of Ghana.'

The attack comes barely one week after the minority group forced government to withdraw a motion to approve a Supplier's Credit Agreement between the Government of Ghana and STX Engineering and Construction Ghana Limited, for an amount of US$1,525,443,468 – for the construction of 30,000 housing units for the security services in the country.

Why the attack?
Briefing the media in Accra yesterday, with respect to their claim on the issue, Minority Leader, Osei-Kyei Mensah-Bonsu said the terms and conditions offered in the agreement are not in the interest of the people of Ghana, since all the risk bearing is placed on Ghana.

Per clause one of the agreement, the Government of Ghana intends to purchase 45% of the 200,000 units to be constructed under the Housing Project, but the Minority Leader said its implication is worrying, since the country would be bent on paying US$4.5billion, an 'equivalent to 30% of Ghana's GDP; 150% of our gross international reserves; and over 50% of our current stock of debt, now estimated at US$9.2billion.'

'This single transaction, which involves one Ministry, and relates to housing, only one of the three limbs of the Ministry of Water Resources, Works and Housing will increase the public debt GDP ratio from about 60% to over 90%,' noted the Minority Leader.

According to him, per the dictates of clause one in the agreement, the government would pay US$90 million per annum or US$1.8 billion, over twenty years. 'To put it in perspective, in 2009, interest payment on all our external debt amount to US$141 million. After the grace period of five years, government will need about US$400 million to pay principal and interest on the loan for fifteen years. Clearly, the deal has serious implications for the nation, especially, when viewed in the context of our ability to pay,' he said, adding 'as at the end of 2009, government owed about US$1billion to various contractors, including statutory payments to GETFund, District Assemblies Common Fund, National Health Insurance Scheme and Social Security contributions. If we don't have money to pay these statutory payments, how can we think of making discretionary payments on one single transaction that could amount to US%400millon? Are we using resources wisely as a nation?'

Doubts raised over STX's ability to finance the Project

With regards to funding the project, the Government of Ghana has issued a guarantee as stated in Clause three of the agreement to STX Engineering and Construction to obtain funding from financiers and investors for the 45% of the 200,000 housing units. However, the minority finds it unacceptable and stressed that if the company needs money to finance its project, it must go the banks for help and 'not an intermediary that is not a financial institution.'

'In clause five, Government more ominously, is being asked to waive its sovereign immunity. What this means it that should there be a default, STX Engineering and Construction could be attaching our properties all around the world. Is this type of agreement our nation wants to have with a private company? Why bending over backwards for one single company? Don't we place any value on our sovereignty?' he asked.

STX Engineering and Construction Ghana Limited had identified Woori Bank of Korea as a potential lender but its request was turned down by the bank after having identified some flaws in the documents it provided.

Further checks on the ability to finance the project, according Mr. Mensah-Bonsu also revealed that STX was only eligible for funding for feasibility studies for the Ghana Housing Project.

'For the Korean Government, the Ghana Housing Project is only at a feasibility stage. In the circumstance, can anyone claim that there is a credit facility of US$1,525,443,668 available for the project? So what was Parliament being asked to approve of? Funding for feasibility studies? If the feasibility stage is not over, then Parliament could not be approving a credit facility of US$1.525 billion,' noted the Minority Leader.

Per clause five of the agreement, the minority leader noted that the Government of Ghana was going to be liable to pay within ten business days all expenses incurred including but not limited to, legal valuation and accounting fees, travel expenses and other out of pocket expenses and any VAT on those expenses. In addition, the government would be responsible to pay all stamp duties, documentary, registration or other charges or taxes imposed or chargeable in connection with any financing document.

'Besides these manifestly giveaways, Government of Ghana in the Suppliers Credit Facility is further required to pay an arrangement fee of 0.7 percent as well as a management fee of 0.5 percent. These together, amount to about US$19million on the US$1,525,443,468 credit facility. This amount will be deducted up front. In other words, before one single unit is built, STX Ghana will be paid this amount,' noted the Minority Leader.

The Government of Ghana, the Minority Leader stated, is also required to pay over US$250million as insurance on the facility. The group also expressed worry about the interest rate of the facility which has now been increased to 2.25 percent per the rates charged in Korea.

Aside what is required in the agreement by the Government of Ghana, her Korean counterparts, STX Engineering and Construction are to; plan, design, implement and execute the Housing Project at the sites in accordance with international standards; obtain funding for the execution of the Housing Project utilizing the Government of Ghana's guarantee to be provided in accordance with the Off-Taker Agreement and directly or indirectly, use local resources of Ghana for at least thirty percent of the resources for the housing project and train the locally-hired labour force so that they can be equipped with necessary technical and professional skills.

'If you compare what is required of Government of Ghana as described above and what is required of STX Ghana, it does not take a genius to come to the conclusion that the agreement stinks. It is completely one sided. No counter guarantees are being demanded of STX Ghana. No questions are being asked of its capacity to find the requisite financing, especially, since it is not a bank. No questions are being asked of its capacity to build 200,000 units, since the largest contract STX Korea, the backbone company itself has obtained in building is 27,000 units in China over eight year period.'

'That contract was secured in 2008 for an average yearly production of about 3,475 housing units. Two and a half years into the contract, they have woefully delivered just over 3,000. That is STX Korea. In Ghana, STX Ghana is supposed to deliver 40,000 per year. Does their track record indicate proven capacity to deliver?' asked the minority leader.

Local contractors versus STX Ghana
However, giving a comparative analysis of the STX housing deal with respect to what local contractors have offered to produce when given the opportunity said it does not make economic sense to go into such a project.

According to him, in spite of all the tax exemptions, provision of land, infrastructure and other utilities to STX Engineering and Construction, the price charged per unit far exceeds that provided by local contractors.

Under the agreement, STX Engineering Construction Ghana Limited will construct single bedroom units, two bedroom units and three bedroom units at an average cost of US$50,000 compared to that provided by Goodwill International Group at Katamanso in Accra. The said houses are priced at US$55,000 for five-bedroom houses, US$45,000 for four-bedroom whilst a three-bedroom cost US$37,000.

'In our case, if you add to the cost of the construction, the cost of the parcels of land, it is the construction company, Goodwill International Group that is acquiring the land at their own expense. They are providing infrastructure, they are providing the utilities and the cost of five-bedroom is US$55,000. The cost of four-bedroom detached house is US$45,000 whilst a three-bedroom semi-detached house is US$37,000 and they are paying taxes. But for STX, if you add the cost of the acquisition of the land, the roads, and drains, they will add at least one-half of the cost to the US$50,000 which will mean that will have about US$25,000 extra to US$50,000. This means that the three-bedroom house will then exceed US%100,000. Does it make economic sense to go into such a project?' quarried the Minority Leader.