The $10 Billion Stx Housing Contract: Government Must Tread Carefully On This Very Big Deal!

It is because I have written extensively on real estate issues in Ghana that
I feel a sense of duty and obligation to write on this subject. In a
previous article titled, “The job-creating machine called the real estate
industry in Ghana” (
http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=179843 ),
I have established beyond doubt the multiplier economic effect real estate
development creates in any country. There is no question that the
industrialized nations of the world today were built on the back of
extensive real estate development. It was the construction industry that
built America in its formative years and turned it into a very powerful
nation over the years. It is in this same spirit that I welcome any attempt
by any government in Ghana, NPP, NDC, CPP, PNP or whatever party, to solve
the one million housing deficit we have in our country today.

To me, the attempt by the current government to build 200,000 houses in
Ghana is welcome news indeed. Can we imagine for one moment the number of
jobs this could create in Ghana, let alone the impact on so many other
industries in our country? A $10 billion investment overall in an economy
like ours is a big deal indeed, and could stimulate our economy extensively
for years to come. On face value, this looks very, very promising indeed.
However, it is when you look at the fine print in this whole proposal that
you start feeling very queasy and uneasy about the whole deal. It is the
freebies and the giveaways our government is offering to procure this
transaction that make it very worrisome indeed. Here is the list of
government giveaways:

1. A Ghana government sovereign guarantee to enable the Koreans go to
the world capital markets to raise funds for the project. What this simply
means is that the Koreans currently don’t have $10 billion of their own
money to invest in our country. Our government has to give them the
guarantee to go raise that loan which we could be stuck with if they could
not pay back to their investors. Why couldn’t our government offer such
similar facility to a consortium of Ghanaian real estate developers who have
established a track record of building fine houses in our country? Ghana was
very successful in raising $750 million on the world capital markets
previously. Why couldn’t we make similar efforts on the housing front? Why
not?

2. Our government is offering free land to the Koreans from government
land banks. Is our government equally willing to be that generous to local
real estate developers? How come for all these years no government in Ghana
has done so for our local real estate developers who have toiled for years
without much government support? Where is the doctrine of equal opportunity
for all? Or are we still stuck in the colonial mentality that anything
foreign is always better than our own?

3. The Ghana government will provide free infrastructure such as roads,
electricity, water, power lines, telephone lines, etc., etc., to the houses
built by the Koreans. Folks, AT NO COST TO STX! Has anyone at any of our
ministries done a cost analysis of all this to find out how much extra cost
this will be to our government? Have we? Will our government readily offer
this freebie to a consortium of Ghanaian real estate developers too?

4. Unconditional import duty and income tax exemptions for STX and
their expatriate contractors and staff – are we willing to do this for our
fellow Ghana real estate developers and their employees too?

5. Unconditional VAT exemptions on materials STX and their expatriate
contractors and staff will buy locally in Ghana. How come we have not done
so yet for local estate developers to stimulate our own economy?

6. A full 100% profit repatriation for STX and its employees on all
their projects in Ghana. What a sweet deal Ghanaian real estate developers
will die for!

7. Under the “Financing Documents” section of this deal the Ghana
government will pay such expenses as travel, legal and accounting fees
incurred by the Koreans in the execution of the entire project for their
length of stay in Ghana.

8. An off-taker agreement that guarantees the Koreans that every house
they build will be purchased by the Ghana government. Quite an iron-clad
guarantee Ghanaian real estate developers will die for in these turbulent
economic times!

Let me state categorically here that I am not interested in the politics of
this STX housing deal. Far from it! I am a real estate professional and my
interest is in how beneficial this real estate project is for our country,
Ghana. I would caution that we approach this whole deal carefully, do a
thorough cost-benefit analysis by independent professional experts and not
rush this thing through parliament only to regret later. Let’s not get
bamboozled by a Korean government who are quietly gunning for our oil
prospects, arm-twisting us, and using our housing deficit as a front to
achieve their goals. Politicians are notorious for seeing sensitive economic
issues only through the political prism and blinding themselves to the stark
realities their decisions could inflict on the economies of their own
countries. They may achieve bragging rights for the next election but it is
the people of Ghana who get stuck with the bill in the long run. We’ve seen
this movie before. Ask the United States of America why their country is
hemorrhaging today and they will tell you plainly. If STX builds 200,000
houses for Ghana, our country will still be 800,000 houses short. Is the
government of Ghana willing to give local developers equal treatment and the
same freebies listed above for the remaining 800,000 houses? Is the
government willing to? Will they do it? Can you imagine how much that would
stimulate the Ghanaian economy if they did? Eight-hundred thousand houses?

I have visited the offices and projects of a lot of real estate developers
in Ghana and I feel proud to be in such august company and write proudly
about it. Why our own governments won’t promote our own people in the real
estate industry bothers me greatly. Can’t we learn from the recent refusal
of visas by the US government to some of our ministers in the Cosmos oil
deal involving the US conglomerate, ExxonMobil? The US will do everything to
promote American companies first before anybody else, but in Ghana it is the
reverse! Most of the Ghanaian developers have all told me: “FINANCING is our
biggest problem!” Seriously, by this STX deal, the government of Ghana is
simply creating the blueprint for Ghanaian real estate developers to DEMAND
EQUAL OPPORTUNITY from future governments. Let’s not rush into this. Let’s
tread carefully on this deal. I hope the powers that be are listening!

Peter Atsu Tsikata
Real Estate Consultant
Millennium Properties Ghana Ltd
Direct: +233-54-541-0350
Tel: +233-30-282-4140
Cell: +233-26-655-7066
Fax: +233-30-282-4132
Efax: 775-257-1811(USA)
Email: peter@millenniumtoday.com
Web site: www.millenniumtoday.com