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Opinions of Sunday, 28 March 2010

Columnist: Boakye, Charles Kwame

Addressing Ghana's Housing And 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.


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.


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.

But the real source of value is neither the money, nor the raw materials, nor the products produced from them, but mankinds ability to figure out the nature of the universe, and to intervene to create what had not existed previously. Human creativity is the source of wealth, while money is a mere convenience, a way to exchange wealth created elsewhere - a challenge to our knowledge and innovation economy. These issues in the productive sector can be turned around, if we set aside our fantasies about money and return to the physical economy.


The worst thing we can do is to allow ourselves to be held hostage about money. Money should not be confused with wealth. Money is just a tool for measuring the amount of wealth and success a person or nation has attained. Wealth has always existed whereas money has not. In this world, it is possible to be wealthy, have a lot of goods or mineral wealth, but yet be without money. Wealth is the value of the assets owned by a person, community or a State.

My research at the Minerals Commission, Geological Services Department and other sources indicates that Ghana has mineral wealth with gross value in excess of US$1,000 billion. This is a strong security to mitigate against any venture we undertake. It comprises Gold - $350billion; Iron ore - $250 billion; Bauxite $250 billion; Oil and Gas $150 billion, etc. This is besides other reserves of economic value in limestone, kaolin, clay, silica sand, granite, salt, manganese, etc.

The exploitation of these raw materials will invariably lead to the establishment of several downstream industries, and value addition in itself creates tremendous wealth and several multiplying effects in the economy. Why should foreign companies use our discovered assets as security for loans, develop them and give us 10 percent, when we can do the same, and take our 100 percent? We need to reverse this investment regime. It may have happened for the first and second round of investments, but should not be the working blue print.

Another way of creating wealth is to develop a credit system. We must improve and enforce trust among ourselves; people must be what they say they are. If we do not know ourselves, we cannot solve our problems, we cannot create more money. This is the basis of a viable credit system. Without an efficient credit system, we cannot meet our development needs. We must enact a National Credit Act to give legal basis to the system.

Ghana is also poor because a large number of its populace is in the informal sector  almost 80 percent. Poverty is an informal sector phenomenon. Out of an adult population of 12 million, Ghana has only 1.2 million bank account holders (a ratio of 10%) compared to Nigerias 23 million banks accounts holders among an adult population of 70 million, (more than 33%). In most emerging countries, the ratio is close to 100 percent. We cannot brand the country as financial hub of West Africa with this trend.

It is useful to tailor instruments for the informal sector but our ultimate aim is to move the entire population to the formal sector; drivers, farmers, house helps, construction workers, etc. Then their assets too, houses, cars, land, businesses, etc. all represented in a property document that is the visible sign of a vast hidden process that connects to the rest of the economy. Elsewhere, they are used as collateral for credit. It is about better identification and the State must create incentives to make this happen, through attractive social security schemes, credit and housing investment. This principle is well laid out in Hernando De Sotos book The Mystery of Capital.

Naill Ferguson, author of The Ascent of Money also said money, being a medium of exchange is about trust  trust in the person paying the money, trust in the central bank issuing the money, trust in the commercial bank that issued the check. Money is not a metal, it is trust inscribed, and it doesnt matter what is inscribed on, paper, silver, clay, screed, electronic, provided the recipient believes in it.

Trust is what Ghanaians, ordinary citizens and business leaders need today as the global economy makes us more and more reliant on strangers to carry on with our business. According to Stephen Covey in his book The Speed of Trust, trusted people and organizations do things better, faster and at a lower cost.

The British Prime Minister Mr. Gordon Brown, in the heat of the financial crisis last year said the Latin word for Credit is the same as the Latin for Belief or Trust. Therefore if we want to develop credit, we must improve trust among ourselves, trust by the State and trust by Corporate Ghana.

The National ID system is probably the most important programme in Ghana today and could help improve trust among ourselves. Ghana is about the only country in Africa without a national ID system. It is not surprising interest rates in Ghana are the highest in Africa. National ID must underpin everything we do. Unfortunately, registration is in its fourth year and only half of all regions are covered. We must make conscious effort to make it succeed.


An effort to solve our housing challenge could turn up to be Ghanas own home grown solution to the financial crisis  an ideal economic stimulus package. All over the world, the housing and real estate industries are the backbone of the economic transformation of nations. Indeed the value-addition nature of the housing sector can help to capitalize the private sector and increase the credit base of the banking and insurance sectors.

Currently, a housing demand of 1 million units needs to be built, and might double to 2 million within the next decade. There are new ways of solving the problem that we need to exploit. Albert Einstein said we cannot do the same thing over and expect different results. We need to rise above current ways to solve problems. We cannot develop holding on to the same ideas.

The housing problem can be solved, but not the way we propose to do with the Korea deal. I believe the Koreans would better serve Ghanas needs by helping us address the Railway and Energy sectors. As the Germans did to their railway sector and the French and Canadians to the nuclear programme, any arrangement should be based on technology transfer arrangements.

We must develop more growth centers

Ghana has crossed the 50 percent urbanization mark this year and for the first time, more people are living in urban areas than rural areas. In anticipation of urbanization and household growth, the best way of addressing the housing crisis is to develop new growth centers and rejuvenate existing towns and cities. Housing involves a package of services, including the land, services, public facilities, the structures, recreational facilities, institutions, etc. all located in towns and cities.

We need to finalize the Shelter policy and create new housing laws and institutions such as National Housing Authority, Real Estate Act, Integrated Iron and Steel Authority, Cement Authority, Integrated Aluminium Authority, etc.

We must take advantage of new ways of addressing housing and plan our cities well, strengthen the Town and Country Planning Department, build new cities, do away with conflicting planning laws; cf. Town Planning Ordinance CAP 84, Local Government Act - Act 462 and NDPC Act 480. China has planned and modelled out 220 cities of one million population each that will be built by 2030 and we must use similar strategies to develop our cities.

Well-designed cities promote the business cycle and provide the attraction and formal systems to mobilize funds to undertake more infrastructure investments. Firms prefer to locate in livable cities because of increased efficiencies in output and trade. Cities also help to integrate national economies with the rural economy.

One of such cities planned in Ghana is the Western Corridor City project. Ghana has the land that must be developed, materials to be mined, people who want to work, professionals who can innovate and credit systems to be developed. We have everything. And the recent discovery of oil and gas offers the opportunity to develop a fresh range of industries, including plastics, cement, bitumen and fertilizer. Yes, fertilizer is also important since a sound agricultural foundation is a sine quo non for an irreversible industrial takeoff.

The nations infrastructure is crumbling; a silent water and energy crisis is taking place, waste management, etc. are in disarray. Every day as I watch TV3 and Metro TV and see the state of infrastructure in our public hospitals, schools, police stations, prisons, etc. I feel this country is gearing for major crisis unless something drastic is done. We need to attempt measures like what are described above. There are other challenges in forest degradation, dwindling water resources, traffic congestion, soil degradation, rural urban migration, etc. that needs to be addressed too. Any of these issues poses an imminent threat to our nation state.

The state of our water resources is particularly scary as deforestation, urbanization, galamsey and climate change continue to pose challenges. In an industrializing environment, the demand for fresh water increases to meet the needs of new factories, expanded agriculture, accelerated population densities in industrial towns and cities, and expected higher living standards.

Giant problems require giant solutions. We must think big if we want to thrive, and we must think long term. We must take bold and courageous decisions and get rid of fear. If we plan holistically, we realize the solutions are much inter-related, and may not require as much as we might think. We need to craft appropriate spider-web economic strategy to solve them.

There is no better time to develop as technology and knowledge has made things easier. At the time of the Industrial Revolution, the Europeans did not know a fraction of what we know today. Yet they made it. The mineral industry - a trillion dollar value - can play a significant role in realizing Ghanas recovery. But every part of this sweet land has its strengths. Even Bongo, the poorest district in Ghana has beautiful green flat landscapes with stunning natural granite outcrops ideal for recreation and tourism. There is a great danger in our continued reliance on external partners for our living. We need to take matters in our own hands. The problems did not start now. They started decades ago. Thus similarly, we do not have to make decisions on the basis of now, we have to think of the future.

We must start with what we have - our people. We never know how far we can go until we start. Franklin D. Roosevelt, the thirty-second US President said it is reasonable to take a method and try it. If it fails, we must admit it frankly and try another. But above all, we must try something. If previous methods failed, there is always room to try others.

The East Asian miracle was caused by leaders who made bold and courageous decisions, who when they realized that something was not working, quickly got back with their technocrats and redesigned to make them work.

I hope this helps as we move our Nation forward in the right direction.

Charles Kwame Boakye,

A concerned citizen,