STX Housing Deal Crashes

Posted on: www.dailyguideghana.com

By William Yaw Owusu

Monday July 4, 2011.
Painstaking investigation conducted by DAILY GUIDE has revealed that the Koreans are on the brink of pulling out of the controversial multi-billion STX Housing Project unless something dramatic happens.

Although officials of STX Engineering & Construction Ghana Limited, who have entered into a contract with the National Democratic Congress (NDC) government for the construction of 200,000 houses in Ghana within a period of five years estimated at $10billion, have remained tight lipped, a deep throat source says the Koreans are about leaving the country, bringing the contract to an abrupt end.

STX is said to be pulling out of the deal because they are persistently frustrated by attempts by the government to allegedly make the Koreans ‘irrelevant’ in the process.

According to sources, the sovereign guarantee issued by the Ghana government to STX to enable it to raise loan has allegedly been given to B.K. Asamoah, the man who facilitated the deal, to source for funding in financial market without reference to the Koreans, and contrary to the agreement.

Mr. Asamoah is said to be out of the country when DAILY GUIDE tried reaching him on phone.

The insurance on the loan, according to DAILY GUIDE sources has been paid even no dime has not been sourced in terms of funding for the project.

According to the source a son of a powerful Minister in the Mills administration is hobnobbing with a party in the STX deal to benefit from the $300 million insurance fund and had formed an insurance brokerage to facilitate the transfer of cash even though the company has not sourced for funds for the project.

Minister of Water Resources Works and Housing, Alban Bagbin is also alleged to have travelled abroad including United States and Mexico recently to push for alternative sources of funding for the project which is becoming an albatross on the neck of the Mills administration following the fanfare that greeted its sod cutting at the National Police College at Tesano in Accra.

Mr. Bagbin is said to be out of the country for his leave when DAILY GUIDE visited his ministry last week.

He had said that funds have been made available but did not tell the source.

However, DAILY GUIDE learnt that government has made money available from Government of Ghana account to enable the project to take off on the assumption that when the company is able to secure funding, the money will be paid back to government chest without interest.

The site of the sod cutting ceremony has overgrown with weeds when DAILY GUIDE visited the place last Wednesday.

STX had promised to bring the money from Korea as captured in the agreement, but once that has not been done yet and judging from the fact that the NDC is desperately awaiting the commencement of the project, the government has backed the local partners to look elsewhere for cash contrary to the agreement.

There are suggestions STX Korea is having difficulties sourcing the necessary funding for the project because a provision allowing the company to claim oil if the country ever defaulted on its payment has been removed from the agreement.

This side stepping is what has infuriated the Koreans, prompting them to make attempts to dismiss the Ghanaian directors.

Sensing they could be dismissed, B.K. Asamoah and another Director J.B. Asafo Boakye filed a motion at the Commercial Court in Accra seeking to stop the move but in the process Mr. Bagbin said the government intervened and said issue was being settled out of court.

He had said the problem between the directors was as a result of breakdown in communication and that government had another strategy to ensure that the project still continues even if the standoff is not resolved on time.

Daily Guide sources at the STX office at Airport Residential Area, Accra say the government succeeded in persuading BK Asamoah to withdraw the matter to pave way for an out-of-court settlement but the matter has not been ‘fully’ resolved as the Koreans are determined to carry out their threats to remove the Ghanaian partners.

To heighten their fears, MP for Ketu North and Chairman of the Finance Committee of Parliament, James Klutse Avedzi was quoted in the media as threatening that should STX Korea fail to put any structures on the ground after one year the government would have to abrogate the contract or seek a new supplier.

He rejected suggestion that STX Korea was having difficulties sourcing the necessary funding for the project because a provision allowing the company to claim oil if the country ever defaulted on its payment has been removed from the agreement.

“As far back as three months to the time we approved it (agreement), we made known to them that we were not going to use the oil as collateral; that portion of the agreement - we made it known to them – we were going to delete it. If they had any concern about that they would have notified us but they didn’t so it means they accepted our proposal,” he said.

And the contract is on the verge of being abrogated because the money from Korea Fund, the source of funding for project will not come.

The STX source said “we have tried hard to hold ourselves down on this matter but unfortunately it is our partners and employers (Government of Ghana) who are talking. They want to bring issues that can be easily settled amicably on the quiet to the public domain and I do not think it speaks well for both parties.”

He said “this is a very important project which should be devoid of politics but there appear to a section of the Ghanaian public that think the project has been unduly politicized. As for STX, we are committed to partnering any government to get the people of Ghana decent accommodation.”

“This is a very sensitive project and we have to respect the emotions of the people of Ghana. This country has a lot of investment potential coupled with its tolerance for democracy and STX wants to also invest here to boost the economic state of Ghana.”
The source confirmed that the Koreans are indeed leaving the country in batches but insisted they will definitely come back to start the project.

“Under Korean Labour Laws, it is mandatory for all citizens who are working abroad to come home on leave after every four to six months of work. It will not be correct when someone suggests that we are pulling out. Once we are here we have to fulfill our mandate,” he explained.

Asked why the project has not started ever since the groundbreaking ceremony by President Mills about six months ago, the source said “we are working on permits for utilities to the project sites and the Koreans who would be working on the projects.
We are also working on the designs and agreeing on the work score between the employer (Government of Ghana) and contractor (STX).”

“We did not come here to exploit the government and people of Ghana. STX is happy in this contract. We believe the problems coming up will be solved. We are very much aware that when Ghana’s economy grows STX will grow also.”

A cursory look at STX magazines published in 2011 positively highlights the Ghana project alongside other projects across the world.

One careful observation though is that while there are clearly stated time lines for all STX projects across the world, there is none for the projects in Ghana.

NDC government reached an agreement with STX Engineering & Construction Limited, Korea through its subsidiary in Ghana for the construction of 200,000 houses in Ghana within a period of five years estimated at $10billion and in August 2010, Parliament approved an initial off-take agreement for 30,000 housing units for the security agencies at a proportionate cost of $1.5 billion.

Recently, Danquah Institute (DI), a policy analysts group raised red flag over the implementation of the project because of what it calls “the government’s ambiguity, changes and re-arrangements with sources of funding of the project”.

A fellow at IMANI Ghana, Kofi Bentil has also challenged Bagbin’s claim that there is funding for the project and stated that evidence available clearly showed that there is no funding for the project.