Govt selects Quarm-LMI to complete Saglemi Housing Project

The government has selected Quarm-LMI as the preferred developer to complete the long-stalled Saglemi Housing Project. According to a press release from the Ministry of Works and Housing, this decision follows an extensive negotiation process led by a government team, which included representatives from the Ministry of Finance, the Office of the Attorney General and Ministry of Justice, and Deloitte, with technical evaluation support from the Ghana Institute of Surveyors.
“As part of the redevelopment, the government and the developer will both recover their investments when the project is completed,” the statement added.
It explained that upon completion, the houses would be sold to the general public, with a focus on salaried employees and workers’ unions.
The Ministry reiterated that the Saglemi project has not been sold to the private developer.
According to the statement, Quarm-LMI would finance and complete the project. Commenting on the development, the Minister for Works and Housing, Kojo Oppong Nkrumah, said, “This marks a major step forward in reviving the Saglemi Housing Project. We are confident that the completion of the project will serve the people and help address Ghana’s housing deficit.”

Executive approval
In August 2012, then-President John Dramani Mahama granted executive approval to the Ministry of Water Resources, Works and Housing for the construction of 5,000 affordable housing units (the Saglemi Affordable Housing Project) for sale to workers through mortgage arrangements provided by Ghana Home Loans, to be implemented by Construtora OAS Limited.

Credit Suisse offered buyer’s credit of $200m
The project was to be funded by a Buyer’s Credit of $200 million provided by Messrs Credit Suisse International (Credit Suisse).

Parliamentary approval granted on October 31, 2012
On October 31, 2012, Parliament granted approval for the government to secure a facility of $200 million from Credit Suisse for the construction of 5,000 affordable housing units by Messrs Construtora OAS Ghana Limited, following a joint memorandum to Parliament by the then-Minister Enoch Teye Mensah and the then-Minister for Finance and Economic Planning, Dr. Kwabena Duffour.

Facility agreement signed on January 4, 2013
On January 4, 2013, a Facility Agreement was signed between the Ministry of Finance, as the borrower, and Credit Suisse, as the creditor, for a facility of $200 million for the construction of 5,000 housing units.

EPC agreement signed on January 4, 2013
On the same day, the then-Minister E.T. Mensah signed an Engineering, Procurement, and Construction (EPC) Agreement with Construtora OAS Ghana Ltd for the construction of affordable housing units at Saglemi in the Greater Accra Region.

2,172 Acres of land
The project, which was to be executed in four phases on 2,172 acres of land, was priced at $200 million, including consultancy services.

Escrow management agreement
An Escrow Management Agreement, a condition precedent to the release of the facility to the borrower, was signed pursuant to the Facility Agreement and the EPC Agreement between the Ministry of Finance (Borrower), the Works and Housing Ministry (Account holder), the Bank of Ghana (Account holding bank), and Construtora OAS (Contractor).

Proper application of funds
The purpose of this agreement was to ensure that the $200 million facility would be properly applied towards the development of the 5,000 housing units.

Payment procedure
The agreement required that payments under the contract be made only after specific works had been executed, verified, and certified by the project consultants, Architectural and Engineering Services Ltd. (AESL).

EPC agreement provided for an advance payment of 40%
The EPC Agreement provided for an advance payment of 40% of the contract price to the contractor within five working days of the facility being received in the Escrow Account.
This advance payment was to be applied toward specific works outlined in the contract.

Specific project milestones
The remaining amount of the contract price was to be paid to the contractor based on the fulfillment of specific project milestones, verified and certified by the consultants before payment.

Credit Suisse disbursed $200m on January 9, 2013
On January 9, 2013, Credit Suisse disbursed an amount of $198,450,000, representing the $200 million minus fees and transaction expenses, into the Escrow Account.

12.5% Interest rate per annum
The $200 million facility had a grace period of two years and a repayment period of five years at a 12.5% interest rate per annum on the cedi equivalent of the dollar loan amount, based on the dollar-to-cedi exchange rate at the time of disbursement.

$249.6m Estimated total debt to be serviced
The total debt to be serviced was estimated at $249.6 million, while the total sale proceeds of the 5,000 housing units were expected to bring in $257.27 million.

2-Bedroom for $29,000, 3-Bedroom for $57,000
According to the agreement, a 2-bedroom unit was to be sold for $29,000, while a 3-bedroom unit was priced at $57,000.

$80m Paid to contractor on February 27, 2013
On February 27, 2013, an amount of $80 million, representing 40% of the contract sum, was transferred to Construtora OAS as an advance payment.

$196.4m Spent on the Project
A total of $196.4 million ($196,428,891.66) has been spent on the project so far.

$179.9m Paid to Contractor
According to court documents, the contractor was paid $179.9 million ($179,904,757.78) despite having completed work valued at only $64 million ($64,982,900.77).

Construtora wrote to terminate the contract
On February 18, 2019, Construtora OAS Ghana Limited wrote to terminate its contract with the government.

Contractor demands compensation
In a letter dated March 8, 2019, signed by the company’s directors, including Charles Maia, the contractor demanded compensation.

$114m Additional investment needed
An additional $114 million from the government is estimated to be needed to complete all outstanding works to make the 1,506 housing units habitable.

$68m Needed to complete housing units
Reports from AESL and the Ghana Institution of Surveyors (GhIS) revealed that $68 million is required to complete the 1,506 housing units and on-site infrastructure.

$30m Required for water supply
The Community Water and Sanitation Agency estimates that $30 million is needed to connect water to Saglemi.

$8m Needed for electricity supply
The Electricity Company of Ghana (ECG) estimates that $8 million will be required to extend electrical service to the area.

$5m Needed to provide storm drains
The Ghana Hydrological Authority (GHA) has quoted $5 million as the amount required to provide storm drains for the site.

Five people standing trial
Five individuals, including former Minister of Water Resources, Works and Housing Alhaji Collins Dauda, and former Chief Director of the ministry, Alhaji Ziblim Yakubu, are currently standing trial facing 70 charges related to their alleged involvement in the Saglemi project scandal.
They have all pleaded not guilty and have been granted bail.