How cost of 1,506 Saglemi Housing Units has risen to $310.4m

It has emerged that none of the 1,506 housing units under the Saglemi Affordable Housing Project is habitable because they are at various stages of completion and no provision has been made for water, electricity, storm drains and other related amenities.

The completion rate of all the units ranges from four per cent to 96%.

$114m additional investment needed

Consequently, $114 million additional investment from government is needed to complete all outstanding works to make the 1,506 Housing Units habitable

$68m needed to complete housing units

An assessment of the project based on reports from Architectural and Engineering Services Limited (AESL) and Ghana Institution of Surveyors (GhIS) revealed that $68 million is required for the completion of 1,506 housing units and other on-site infrastructure works of the project.

$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

Also, Electricity Company of Ghana (ECG) estimated that $8 million will be required to extend service to the area to serve the facility.

$5m to provide storm drains

Estimates from Ghana Hydrological Authority (GHA) quoted $5 million as the amount needed to provide storm drains.

The original output target of the Saglemi project of 5,000 units is $200 million as stipulated in the financing agreement 

Currently, an amount of approximately $196.4 million ($196,428,891.66), representing 98%, has been expended on 1,506 units as against the planned 5,000 units.

Cost to rise to $310.4m

If government finds the additional $114 million to complete the 1,506 units, it will increase the total cost from $196.4 million to $310.4 million.

A unit will cost $206,108

When the $310.4 million is divided by 1,506 units, it will bring the cost of one unit to $206,108.

This obviously will make the houses too expensive, and the original plan to sell them will remain a mirage.

Mahama’s executive approval

In August 2012, the 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).

Parliament granted approval 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 5000 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 at a contract price of $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 also signed pursuant to the Facility Agreement and the EPC Agreement between the Ministry of Finance  (Borrower), 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, therefore, required payments under the contract to be effected only when specific works had been duly executed, verified and certified by the consultants of the project, 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 receipt of the facility in the Escrow Account.

The advance payment was to be applied towards specific works set out 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.

The contractor was required under the agreement to set out the details of the achieved project milestones, which had to be verified and certified by the consultants before receiving 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 Jess fees and transaction expenses into the Escrow Account.

12.5% interest rate per annum

Per the agreement, the $200m has a grace period of two years and repayment period of five years at a 12.5% interest rate per annum on the cedi equivalent of the dollar loan amount based on dollar cedi exchange rate fixed at drawdown.

$249.6m was estimated total debt to be serviced 

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

2-bedroom for $29,000, 3-bedroom for $57,000

According to the agreement, the 2-bedroom unit is to be sold at $29,000 while the 3-bedroom unit is to be sold at $57,000.

$80m paid 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 advance payment.

 

$196.4m spent on the project

A total amount of $196.4 million ($196,428,891.66) has been spent on the project.

$179.9m paid contractor

But, according to the documents filed in court, the contractor who executed the Saglemi project was paid $179.9 million ($179,904,757.78) despite executing work worth $64 million ($64,982,900.77).

Construtora wrote to terminate the contract

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

Contractor demands compensation

The contractor has, in another letter dated March 8 and signed by directors of the company, Charles Maia Galvao and Ricardo Rocha Ulm da Silva, demanded compensation from the government.

Way forward

After detailed assessment of Government’s initial investment and the additional investment required to complete the project, Government directed the Ministry of Works and Housing on October 31, 2022 to ‘explore the possibility of disposing off the Saglemi Housing Project, covering the 1,506 housing units, at the current value to a private sector entity to complete and sell the housing units to the public, at no further cost to government’. Further, Government decision was for ‘the proceeds to be realized from the sale to be re-invested into Affordable Housing Projects’.

In November, 2022 a Technical Working Group (TWG) consisting of representatives from various state and independent professional institutions was inaugurated to draw a roadmap to procure a private sector entity to complete the Saglemi Housing Project.

The Committee will also oversee all necessary engagements to complete the Saglemi Housing Project.

It is also to ensure transparency and accountability throughout the process and ensure value for money in the process.

The Public Procurement Authority has granted approval for the Ministry to engage the Ghana Institution of Surveyors to determine the current value of the project not later than September 30.

The Ministry is also to engage the services of a Transactional Advisor later than October 30, 2023 to facilitate the sale of the project to interested private sector entity.

Procurement of a private sector entity to complete the project is expected to be not later than June 30, 2024.