Anatomy of a project gone wrong: Ghana’s Saglemi Housing Project
The Saglemi Housing Project currently dominating Ghanaian newspaper headlines provides a case study in potential risks littering the path from public policy to investment project. We see licensing risk from a lack of clarity on precise terms of the agreement, governance failings in the form of inadequate parliamentary oversight and contract frustration when project scope is changed alongside non-delivery of certain inputs by government. Importantly, while charges have been brought against two former ministers for wilfully causing financial loss to the state, there are currently no allegations of bribery or embezzlement for example against government officials in connection with the project.
Significance – Obfuscation and Contract Frustration
The project saw its genesis in 2011/12 under the regime of then-president John Evans Atta Mills who, in realising the need for significant investment in affordable housing[1], sought to contract a loan from Credit Suisse for USD 200 million to construct 5,000 affordable homes at Saglemi in the Greater Accra Region. The contract was awarded to the Ghanaian subsidiary of a Brazilian firm, Construtora OAS Ltd. And since then, only 668 units have been constructed and, with the project still incomplete, they remain uninhabited. Beyond this, even this most basic of facts is under contention.
Different members of the then-ruling National Democratic Congress (NDC) claim that the initial loan agreement only covered 1,500 units as the project was to be constructed in phases[2], while others assert that there was no mention of any phases. Both could be right – the loan agreement that was agreed to by parliament was for 5,000 homes and made no mention of construction in phases. However, the parliamentary approval for the project that was granted does mention four phases of construction.
Part of the agreement was for government to provide serviced lands with access to roads, sewage, electricity and water. The chosen site did not have these amenities installed and government did not have the funds to do this, so it allegedly was to use some of the contracted loan to do this.
After the New Patriotic Party (NPP) came to power in 2017, Saglemi became one of several large-scale infrastructure projects that stalled amid allegations of management or contractual failings, impropriety or other. The University of Ghana Medical Centre being another[3].
Attorney General Godfred Yeboah Dame claims that despite the contractor having been paid USD 179.9 million, the value of work done is only USD 64.98 million. He has now brought charges against two former housing ministers – Collins Dauda, his successor Dr Kwaku Agyeman-Mensah, and others – in connection with the project, and the issue of 5,000 units versus 1,500 is central.
In fact, Dauda and Agyeman-Mensah alongside the then chief director of the ministry, the Executive Chairman of Construtora and a director of one of the project consultants have been charged with 52 counts of wilfully causing financial loss to the state, intentionally misapplying public property, dishonestly causing loss to public property, and issuing false certificates. Following their indictment, four of the five suspects were granted bail that totalled USD 332 million (Dauda was released on self-recognisance and had to surrender his passport).
Outlook – Public Loss and Prolonged Litigation
Saglemi’s apparent failings extend from the design of its agreements to its execution, subsequent review and stalling. At the recently held #FixTheCountry demonstration, Saglemi was a common topic of discussion amongst protestors. It even featured on placards. The most common refrain we heard was that those doing wrong need to be held to account, but also that the project needs to be finished and affordable homes provided. Promises to do so have been made by the government but thus far, no work is ongoing at the site.
However, the allegations against Dauda and Agyemang Mensah may prove difficult to substantiate in their current form[4]. The argument that the contract was deliberately and improperly altered to construct 1,500 homes instead of 5,000 has not yet been substantiated. We can expect proceedings to be a drawn-out process. And the longer it remains in the public eye, the more it will be seen as a political witch hunt[5], especially as there has yet to be any claim made that either Dauda or Agyemang Mensah personally benefitted from the contract, i.e. there are no particular claims of embezzlement or corruption against either.
Meanwhile, Saglemi stands out as a case study in the idiosyncratic ways by which country and reputational risks surrounding projects emerge. It underlines the point that even where the underlying rationale is sound[6], and familiar bribery concerns are not identified, other country and reputational risk items may produce losses. Items that may be anticipated, monitored, evaluated, and mitigated against over the life of a project.
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[1] The oft-touted figure is a deficit of 2 million housing units. However, this estimate has been in use for at least five years. The actual figure is likely substantially higher.
[2] With the proceeds of sale of the first phase being used to construct the second phase and so on.
[3] UGMC sat unopened for 18 months before being partially opened in 2018, it is still not fully operational.
[4] The charges against the contractor and consultant, however, regarding payment and work delivered may be more easily clarified.
[5] Throughout the past 28 years of multiparty democracy, two parties have dominated the Ghanaian political landscape, with power changing hands from incumbent to opposition three times. None escape censure in the popular critique.
[6] i.e., the need for affordable housing is substantive and it has been articulated in public policy.
*photo credit: derivative work: Fogster (talk)Osu,_Ghana.jpg: finnish eye, CC BY-SA 2.0
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