Some details of the STX-Ghana Government $10 Billion housing deal

By John Amponsah

On the 18th of June 2010, the executive director of the Danquah Institute published an article on Ghanaweb concerning a big housing deal that Ghana’s government has agreed to undertake with a South Korean corporation known as STX. This article is based on an analysis of the four government papers published on the Danquah Institute's website: Off-Taker Agreement, Memorandum of Understanding, Executive Approval and Memorandum to Parliament). The article seeks to briefly look at some details of these four documents and the possible implications of these details. It should be stressed that I am writing this article as a conscientious citizen of Ghana, rather than as a representative or a proponent of one or another of the various political parties. In the article below, “GOG” stands for “Government of Ghana”.

EXAMINING ASPECTS OF THE AGREEMENT DOCUMENTS

Paragraph 3 of the Off-Taker agreement states:

"The GOG hereby undertakes to issue and in favour of STX a government guarantee, under section 10 of the Loans Act 1970 (Act 335) securing its financial obligations in relation to the GOG Off-Take, valid and sufficiently viable to enable STX to obtain funding from financiers and investors for the forty five percent (45%) of the 200,000 housing units to be built under the Housing Project. In relation to this Off-Taker agreement and the government guarantee, the GOG shall waive its sovereign immunity" (in other words if the government of Ghana defaults on its agreement with STX there can be real and binding legal ramifications, while in all the four documents listed above there seems to be no such legal statement made to ensure the responsibility of STX to honour its side of the deal, unless such responsibility is ‘implied’? Or did I miss it while examining the documents?)

Subsection 1 of paragraph 5 of the Off-Taker agreement says that the government will be providing land free of charge for the project. This particular paragraph 5 protects the company STX from the government of Ghana, while guaranteeing "exemptions of tax, duty, withholding and impost, when applicable..." from the government of Ghana.

Paragraph 2 of the Memorandum of Understanding document between the government of Ghana and STX includes the "permission for STX to operate a port so that raw materials can be imported for production and exported after production without undue hindrance" as well as "Approval of STX's acquisition of limestone mine."

It seems to me here that the Korean company STX will obtain access to raw materials through this agreement with the government of Ghana. This is in line with a statement made in 2009 by the Korean Ministry of Land, Transport and Maritime Affairs, "Korea [has a] lack of natural resources and thus is keeping an eye on the African continent - just as developed nations and China are fiercely doing so - to secure natural resources". Since, according to the MOU "as a world's leading shipping and shipbuilding company, STX has firm intent to expand the scope of cooperation with GOG into the fields of shipping/logistic transport business and shipbuilding of commercial and specialized vessels", it can be said that providing STX with a port will lead in part to facilitating the export of raw materials from Ghana.

According to the "Memorandum of Understanding" document, securities to be provided for the Ghana National Housing Project (GNHP) include "Lands and title deeds" and "Ghana National Petroleum Company's business relations in the oil and gas industry".

THOUGHTS AND QUESTIONS BASED ON THE AGREEMENTS BETWEEN THE GOG AND STX

These agreements seem to facilitate STX business in Ghana. How is the government of Ghana ensuring that such business will be in the interests of the people of Ghana? If land is free, if the company is going to receive tax exemptions, and government is to provide infrastructure (water, electricity, telephone, roads, sewage, drainage), how come Ghanaian government is paying $10 billion for this project? (according to STX Off-Taker agreement). How much is each (type of) housing unit going to cost?

In subsection 1 of section 5 (Benefits) of the "Memorandum to Parliament" document, it is stated: "When this project is completed, it would solve the acute accommodation shortage in the country". Perhaps I am being overly critical in my assessment of this statement, which seems to be more specific than generally true. 55% of the houses amounting to 110,000 will be allocated to non-government use. Does the above statement mean that this number of houses will solve the housing problem among the population not benefiting from government housing, and if so, how will they afford this accommodation?

$1,525,442,468 loan to the government of Ghana for the building of 30,000 units of housing for security agencies is 15.25% of $10 billion, while 30,000 buildings is exactly 15% of 200,000 buildings. 0.25% of $10 billion is still $25 million or $25,442,468 to be exact, which is a lot of money. (refer to Memorandum to parliament, 4th May 2010). This means that on average each house will cost about $50,848 dollars, if we do a straight division of the loan by the number of houses and if we do not consider variations in types of houses. My point: so the government of Ghana is receiving a loan from the company that is to undertake the building, in order for the Ghanaian government to be able to acquire 30,000 of the 90,000 buildings it seeks to own, out of the 200,000? Obviously the government of Ghana is funded by the tax payer, so the bill eventually rests on the citizens of Ghana, which is why citizens must be pro-active in learning about important issues like this one.

Another question that came to mind (while reading the four documents above) was based on this statement from the Memorandum to Parliament: "In addition, the Lender has proposed to engage the Borrower in further discussion on Debt-Commodity-Swap after the execution period". The question that came to mind was, "which commodities are we talking about here?"

CONCLUSION

In the global world we live in today, some large and powerful corporations deal with entire governments and even with entire continents (looked at as a unit) rather than merely dealing with other corporations. While corporations answer to the owners of these “legal entities” (which sometimes includes shareholders), governments answer to the people who elected them into power. Huge deals such as the one signed by the current government of Ghana and STX Corporation go beyond party politics, such agreements will affect lives of Ghanaians and the operation of the Ghanaian economy for posterity. Ideally, agreements between two parties should serve to ensure that the needs of both parties for which the agreement was made, are met. It is hence the duty of both the people of Ghana (conscientious citizens) as well as the elected government to pay close attention to such agreements in order to ensure that they are fair, just and are in the interests of the Ghanaian people.