Addressing Ghana's housing & job creation challenge

A lot of discussion has taken place concerning the housing deal the Government of Ghana signed with the STX Group of South Korea in early March. Reports indicate the deal involves building 200,000 housing units in Ghana by 2015, at a cost of $10 billion, forty percent of the units allocated to security personnel but other details remain unclear.

On the face of it this is a welcome development but there are concerns over this deal that scratch the tip of a major housing crisis and could create barriers to our further developing the housing and real estate industry. This article generally gives solutions to how Ghana can close its one million housing deficit, and addresses interrelated questions relating to Industrialisation, Job creation and Money.

HOUSING
The housing challenge is immense and the entire body of knowledge that facilitates its delivery must be developed if we are to successfully address the deficit, with active participation by the State in key areas, as has been done in other countries.

I have nothing against the Koreans. They are some of the finest people on this planet and have worked extremely hard to build South Korea after the war.

They may have good intentions and we can learn a lot from their technologically advanced but very cultured society.

But if we ask the Koreans their experience on how they built their way out of third world status, they would say they looked inward, developed their institutions, generated funds locally and used their local construction industry. We need to learn from the Korean self-belief, discipline and nationalism to develop our nation. The Koreans would be the first to admit that General Park Chung-hee did not invite foreigners without building institutions and crafting appropriate technology transfer deals.

We have not grown the institutions that would enable us develop our housing industry. By proceeding with this deal as presently crafted, we are essentially developing someone elses market, someones steel, cement, glass, aluminum, tiles, plastics - all housing materials - and ultimately exporting Ghanaian jobs. It is not what we are getting from the Koreans, but what we are giving away.

South Korea has more than a dozen institutions researching, regulating and promoting their housing industry. These include institutions like the Korea National Housing Corp., Korea Housing Guarantee Company Ltd., Korea Iron and Steel Institute, Korea Concrete Institute, among others. These are either government or quasi-government institutions that have enabled Korea construct 500,000 houses per year with a housing supply ratio (number of housing units per household) exceeding 100 percent. Ghanas ratio is less than 50 percent.

The only remaining institution in Ghana, the Building and Road Research Institute (BRRI), is struggling to survive. Though severely under-resourced it is turning out useful clay bricks and pozzolana cement products that support the industry and lower overall building costs. The HFC Bank, originally established to spearhead mortgage financing, is scaling-up commercial bank owing to the fall in housing supply, inadequate construction finance and high cost of mortgages.

The Tema Development Corporation (TDC) and State Housing Company (SHC) are now quasi real estate agencies. The TDC with all their advantages and land assets are not doing it right, while the SHC have retreated to the regions.

But perhaps more importantly Ghana does not have a complete Housing and Shelter Policy as the draft has remained in that state for the last three years. There is not a single bill regulating the real estate industry, leaving house owners at a loss whenever issues of financing, quality and delivery crop up. Ghanas construction industry is also in complete disarray.

It would appear the main financing strategy for the Korea deal is land-financing, an instrument some technocrats, myself included, have advocated for financing infrastructure. This approach has the potential of making use of urban lands within the city for development. It is a great source of funding urban infrastructure and its main attraction is the upfront generation of funds which reduces the burden of borrowing.

Land developments are essentially priced to reflect costs of accommodating growth; the higher the quality of infrastructure, the higher the land value. Several cities worldwide have done it and the results of their experiences have been disseminated to our Ministry of Water Resources, Works and Housing.

Ghanaian professionals in the building industry can execute what we want the Koreans to do, and in a more sustainable way if we plan strategically. Planning strategically also involves addressing interrelated questions relating to land, Industrialisation, money, professional development and job creation. Unfortunately, engineers are not challenged enough to help solve the myriad of infrastructure challenges facing the country.

I believe I speak for Civil Engineers on this matter. We help bring potable water to homes, design the railways and highways, waste management systems, housing and skyscrapers, dams and bridges, flood control and water resources systems, sewerage systems, etc. We do so much for society and are ever prepared to help address the countrys needs. Most of the nations landmarks were executed by Ghanas engineers, eg. the Cedi House, the tallest building in Ghana, some 35 years ago without foreign support. However, going by recent trends, if they were to be done again today, most likely, Ghanaian consultants would be denied the job.

The Role of the State
Affordable housing will materialize only if the State takes advantage of economies of scale in land management, bulk construction materials and credit (banking or financial) for real estate developers, among others.

No country in the world has overcome its housing challenge without a strong intervention from the State. In the United States for example, Fannie Mae and Freddie Mac established during the New Deal era remained Government sponsored entities that until recently held over $5 trillion of asset backed guarantees.

Housing delivers several advantages to the economy and consequently the State must take maximum interest in its delivery. Good housing cultivates good citizenship, ensures that citizens sleep well, think better and innovate for themselves and the nation.

It is a source of long term finance because it is typically the largest investment most individuals make in their lifetime. Good housing is not only a status symbol, but also a symbol of security and inheritance. There is a strong link between housing and poverty, and if Ghana gets housing right, many other things will follow through.

The State of the Housing Sector
There is enormous demand for housing and yet this country has neglected the sector much longer than sound public policy would allow.

The 2000 Population and Housing Census reported the existence of about 3.88 million dwelling units in Ghana, less than half of which are classified as houses. As much as fifty per cent of all dwelling units were constructed with poor quality mud bricks and earth, mostly with thatched roof and poor floor construction materials. In addition, 74,000 kiosks and containers housed several hundred thousand people and a large number of people in urban areas sleep on pavements, walkways and on streets.

The report added that Ghana has 3.7 million households, and growing at 2 per cent is expected to reach 6 million by 2025. That is 2.3 million new households will be generated, each expected to be sheltered in a housing unit. Half of all households in Ghana sleep in one room, 21 per cent in two rooms, 11 per cent in three rooms and only 18 per cent sleep in four or more rooms. The average household size was 5.1 people.

Further analysis from the report indicates that Ghana had a housing deficit of one million units as of 2009 that will double in the next decade if the status quo is maintained. This country must put up 2.5 million housing units by 2025 if we are to meet the housing needs of the populace, about 150,000 per year.

It is understandable given the state of the housing situation why the social cohesion and moral integrity of society are fast slipping. It is not surprising our country also has worse development indicators on facilities related to the home; access to toilets, personal computers, internet connectivity, telephone landlines, etc. The Korean deal does get closer to a solution. Solving the problem needs a gigantic, coherent and strategic approach.

Housing and Job Creation Housing is a big job creator. Developing the housing industry creates demand for several associated industries; steel, aluminum, cement, tile, glass etc. These are materials required in almost every building.

And the good news is Ghana has raw material to meet the housing demands of all Ghanaians, some of them in quantities adequate for the next 100 years.

Iron ore deposits at Shieni in the Sabzugu/Tatale district in the Northern Region are ten times those at Opon-Manso and estimated at 1,270 million tonnes that could yield 350 million metric tonnes of steel. Shieni is located about 30 km from Yendi. Exploitation of the ore will create jobs for the youth of the area, help develop the north and bring the Dagbon crisis to an end, for good. The reality is peace is a story that is difficult to sell on its own. It must go hand-in-hand with development. So in the medium to long term, an integrated steel industry made up of iron ore mining, rolling mill and fabrication industry must be built at Sabzugu or Yendi.

Housing also brings in its wake investments in household gadgets and utensils. A decision to construct 2.5 million homes within 15 years translates into electrical fittings and fixtures, aluminum cables, ironmongery, plumbing and conduit pipes, etc.

The realization of 2.5 million housing units then creates a demand for 2.5 million stoves, fridges, TVs, stereos, furniture, beds, etc. and the manufacturing facilities to churn them out, thus creating several hundred thousand jobs locally. And the populace will have the propensity to purchase and consume more household items when accommodation is secured.

Housing and real estate provide a large number of jobs for various strata of construction personnel; planners, architects, engineers, quantity surveyors, etc. in the high level; middle level technicians; and a large number of skilled and unskilled labourers such as electricians, carpenters, bricklayers, masons, plumbers, tilers, etc.

To achieve the desired job-creation prospects, the Government must make conscious effort to drive national awareness of the importance of skilled workers in building the nations economy. Skilled labourers must be encouraged to form associations for better identification, promoting their common interests, and be classified based on their competence and experience.

With the appropriate strategies, the housing sector can be used to increase available disposable incomes of the public sector in exchange for improved productivity and competiveness. Ghanaians are among the least paid people in the world, and this trend must be reversed. In a globalizing world, we need to increase the purchasing power of the Ghanaian to enable our people purchase assets not just in Ghana but also overseas.

The process of organizing the housing sector must also be tied to the planning system, land tenure system, building and construction sectors, standard codes of practice, railways sector, recapitalize the private sector and kick-starting our industrial development programme.

For example, there is an apparent assumption that rehabilitation of the railway by itself would improve performance, an action we have tried in vain over the last 15 years, and provides part of the explanation for the unfortunate state of affairs of the sector.

The rehabilitation of the lines must be linked to haulage of bulk construction materials, petroleum products, development of industrial zones, etc. in several parts of the country. By enabling goods to be transported more easily, more cheaply and on a larger scale by itself generates demand for other industries.

INDUSTRIALISATION
To address the countrys housing deficit, a long term development plan running for a minimum 20 years, eg. Vision 2030 must be prepared. Planning over a longer term enables all relevant parties to be brought on board, and takes into consideration population growth, demographics, environment and other social factors.

With development, the urgent is never important, and the important never urgent. And results are still visible within a short time.

Next is to craft an industrialisation strategy. Industrialisation is the only policy directive that will enable the country address its housing needs in a comprehensive manner. There is almost no country that one would be prepared to call developed that has not gone through industrial transformation.

Industrialisation will help us add value to our mineral wealth to create more wealth. For example, iron ore sitting in the ground at Opon-Manso is almost valueless. If that ore is extracted and smelted, it produces iron, which is far more valuable than the ore.

That iron can then be turned into steel, which can be machined to build products such as cars, bridges, etc. When it is used to build automobile, the value is transformed 500 times. Each of those products is not only worth more than the materials from which it was created, but it increases the productive power of society as a whole, amplifies the economic benefit and increases the GDP.

Similar arguments could be made for bauxite which was first exported from Awaso in 1943 to satisfy aluminium demands of World War Two. Recently, Rio Tinto Alcan that held 80 percent of the mine decided to transfer its holdings to Bosai Minerals Group of China.

The transfer in its current form is not in the best interest of the State and must not proceed. It goes against the Integrated Aluminium Industrialization Strategy you envisioned for the country during the State of the Nation Address on February 25, 2010. This sale will deplete the Awaso reserves.

Industrialisation will help us develop a system of production, distribution, and consumption, a chain which connects food growers with those who eat it, and miners of ore with those who transform them into the products upon which we all depend. This supply chain is a physical, logistical order, an essential component of civilization which is currently non-existent in Ghana.

It is this productive sector which generates the wealth, and the segment to which greater attention should be paid if our nation is to thrive. This is real economics, to be ignored at our peril - and ignore it we have - as Ghana has focused on macroeconomic indicators for survival. To be continued