Details are emerging about how $200 million earmarked for the construction of 5,000 housing units by the Mahama-led National Democratic Congress (NDC) administration was started and could not be completed despite huge sums paid to the contractor.
The deal was approved by Parliament but by the time it was being executed, the number of housing units had reduced drastically from the approved 5,000 to 1,024 without recourse to Parliament.
Interestingly, the cost for the project remained at $200 million despite the variation from 5,000 to 1,024.
The whole deal
The deal was initiated at the Castle exactly five days after the late President John Evans Atta Mills had been buried on August 10, 2012 and his Vice, John Mahama, had taken over.
It all started with a purported memo on August 15, 2012 from the Cabinet Secretary to the Ministry of Finance and the Minister of Water Resources, Works and Housing and copied to the Secretary to the President, Vice-President and Chief of Staff.
It was purportedly titled: Executive Approval for the construction of 5,000 affordable housing units for the sale to the general public through mortgage provided by Ghana Home Loans and implemented by Constructora OAS Limited through a buyer’s credit of up to $200 million.
“H.E. the President has granted Executive Approval for you to send to Parliament for approval, a proposal for the construction of 5,000 affordable housing units for the sale to the general public through mortgage provided by Ghana Home Loans and implemented by Constructora OAS Limited, through a buyer’s credit of up to $200 million,” the purported directive from the President stated.
It added “the Executive Approval also permits you to present to Parliament for approval, the exemption of tax stamp duties, taxes, duties, levies, fees and other charges relating to the execution of the project.”
By September 20, 2012, the acting Chief Director at the Ministry of Water Resources, Works and Housing, Alhaji Ziblim Yakubu, had written to the Clerk of Parliament to present a joint Parliamentary Memorandum submitted by the Ministry of Finance and Economic Planning and Minister of Water Resources, Works and Housing for the approval of the construction of 5,000 affordable housing units by Constructora OAS Limited.
In the joint memo, the NDC government had agreed Constructora OAS Limited’s proposal that the company, believed to be from Brazil, will build two-bedroom flats for sale at $29,000 and three-bedroom flats at $57,000 per unit respectively.
Project financing was designed such that the total buyer’s credit was $200 million (drawdown), lender was Credit Suisse International, Borrower was the Government of Ghana, purpose was for the construction of social housing under EPC contract with Constructora OAS and maturity and moratorium were seven and two years respectively.
The interest rate was pegged at 12.5% on cedi equivalent of the dollar and repayment was five years with arrangement fee at 0.75 flat.
Interestingly, the project was to be completed within 24 months but even when it was scaled down from 5,000 to 1,024 at the same cost of $200 million, the Mahama government could still not complete the project before it left office.
Last week in Parliament when responding to questions on the status of the project, the current Minister for Works and Housing, Samuel Atta-Akyea, told the House that “on the 21st day of December, 2016, 14 days after former President John Dramani Mahama had lost his position in the elections, the then Chief Director, Alhaji Ziblim Yakubu, and the contractor, again, reviewed the first amended and restated agreement and signed a new agreement which reduced the scope of work to 1,024 housing units instead of the 5,000,”
Mr. Atta-Akyea said to the House that under the second restated agreement, 388 housing units were to be completed externally, while 90 units were to be left at foundation or lintel levels, adding that this was to bring the total units to be constructed to 1,502 units at a revised contract sum of US$181,519,000.
He said the ministry hurriedly paid “a fantastic sum of US$80 million, representing 40 per cent of the contract sum to the contractor as mobilization,” without demanding a bond, which is a necessary prerequisite in such contracts, saying “Rt. Hon. Speaker, I do not know if the then Minister for Works and Housing had been bewitched by the contractor.”
“I submit that the seed of the bankruptcy of the Saglemi Housing Project was sown by this dubious act. This racket was so strong that the ministry did not demand a performance bond as a necessary prerequisite before the release of US$80million.”
The minister told Parliament that the sum of $80 million was released to the contractor when actual work had not started and the contractor transferred abroad $40 million.
“The Saglemi Housing Project, whose contractor is Messrs Construtora OAS Ghana Limited, a Brazilian company, incorporated under the laws of Ghana, was one of the NDC government inherited troubles,” he said.