Thanks to some transformational lending, Ghana’s Kumasi Market is undergoing a complete makeover, set to transform the Ashanti economy and all it touches. flow tells the story of a project involving three governments, a Brazilian origin contractor and Deutsche Bank’s Structured Trade & Export Finance team
On 6 November 2018, excitement was building in the Ashanti Region of South Ghana as crowds started to gather around the Kejeta area of Kumasi.
Why? What was once the former “Prince of Wales Park” had been transformed into a new covered market, and the UK’s actual Prince of Wales was paying a visit to review the progress of a US$259m project started in July 2015, as a guest of Ashanti Kingdom ruler King Otomfuo Osei Tutu II. With Phase 1 being complete, the royal visit marked an important milestone for the people of Ghana in terms of its ongoing infrastructure strategy.
Roads leading to the old market were closed at the start of the project three years ago, and on 11 February 2019 they were reopened to ensure free vehicular and pedestrian access ahead of the official inauguration of the new market.
A video made in early 2019 of the market just as the roads were being opened can be viewed here.
Rationale for the new market
Looking rather like a shanty town when viewed from above, the former open air market had suffered from regular outbreaks of fire resulting in the destruction of stalls and the loss of livelihood to stallholders and store owners, not to mention strain on the emergency services given the thousands of daily visitors. Other difficulties included food hygiene maintenance with deliveries and crime prevention for the authorities, as well as demand for space – the new-look market will accommodate 45,000 stalls and stores and provide parking facilities.
The Ministry of Finance had stated that “infrastructure remains a key development priority to sustain Ghana’s rapid urbanisation and industrial growth as well as attainment of the post 2015 development agenda and Sustainable Development Goals” (Ghana Infrastructure Investment Fund infrastructure policy statement).”
The level of investment needed to close what the Government of Ghana terms “the infrastructure gap” has meant that private investment and public private partnerships (PPPs) such as this one are seen as “indispensable to address this financing gap and to improve the quality of infrastructure services”.
This article tells the story of the success of a different sort of partnership (debt rather than equity-based) involving Deutsche Bank, Brazilian construction company Contracta Engenharia Ltda, and the governments of Ghana, Brazil and the United Kingdom which together is transforming Ghanaian society.
In February 2015, the Ghanaian Parliament approved a US$270mn financing for the redevelopment of Kumasi Central Market and the Kejetia lorry terminal in Kumasi. Construction of the market infrastructure was the first phase of work, which began in July 2015 and involved relocating the vehicles to a new location. By the end of 2018 this first stage was near completion and the scene was set for the second and third phases – the actual redevelopment of the market.
Working with Brazilian construction company Contracta Engenharia Ltda, Ghana’s Ministry of Finance acted as the borrower under a financing package led by Deutsche Bank in September 2014. This included a US$135m nine-year Brazilian ECA (SAIN) covered facility to finance goods and services exported from Brazil and a US$37m eight-year commercial loan. Following the success of the 2014 financing, in 2016 Deutsche Bank arranged a five-year US$97m commercial loan for the financing of Tranche 2 of Phase 1 of the Kumasi market redevelopment project.
Contracta had established a foothold in Ghana with the successful completion of the Accra aircraft hangar project in 2012 and, having demonstrated competence and capability to the buyer – the Ghanaian Government’s Ministry of Defence (the borrower being the Ministry of Finance), it had built its reputation from there.
At the end of 2018 the funding for the first tranche of the second phase of the project was signed between The Ministry of Finance of Ghana (the borrower), for EUR92m. The contractor this time was Contracta Engenharia Ltda’s subsidiary in the UK, Contracta Construction UK Ltd, which was established to procure equipment and services from the UK supply chain and consequently access competitive UK government backed funding. So UK Export Finance (UKEF) guaranteed a EUR80m facility on a 12-year tenor, with the remaining EUR12m being a commercial loan on a five-year tenor. Deutsche Bank was the sole mandated lead arranger and bank lender.
Simon Sayer, Global Head of Structured Trade and Export Finance (STEF) said, “We are excited to be helping support major infrastructure development in Ghana, and about the positive impact these transactions will have on the local population. It is always very rewarding when the improvements to safety, efficiency and everyday quality of life are so very visible.”
A community re-energised
flow also managed to catch up with Fabio Camara, CEO of Contracta Engenharia for his reflection on this project from his perspective as the contractor responsible for delivering the project.
“Having worked with several infrastructure projects during the past 19 years as a civil engineer, this was one of the most challenging, but also most rewarding projects that I’ve been involved in,” he said. This, he continued, was not down to the technical aspects of the construction itself,” but by the large array of social demands and considerations for the designs that needed to incorporate the local culture and organisation on the existing market, maintaining the cultural aspects of the market, but at the same time providing the proper infrastructure for its users”.
Camara first visited Kumasi in 2012, specifically to look at the market and respond to the challenge from the Ghanaian government to find a solution to the less than ideal conditions on the ground at that time. He recalls that the mayor had commented. “I hope you are not the tenth company that comes here, assesses the situation and never comes back again.” This struck a chord. That day, he gave his personal assurance that he would return. "And so I did a few month later with a complete conceptual proposal of what is today the finished Phase 1 of the Kejetia Central Market.”
“As a company, but also as a large group of individuals who worked for years since the conceptual designs until the final execution, we are very proud of our achievements,” says Camara, and rightly so. He adds, “The social and economic impacts of the intervention to the lives of the thousands that use the market each day, we are sure that the positive impact in the region will be perennial and now with the continuation on Phase 2 even more impacting for the benefit of the whole region.”
Being sure of the financial support makes projects like these possible. Camara pays tribute to the support of Deutsche bank and the Brazilian credit insurance from ABGF/SAIN for the first phase. This brought benefits to the Brazilian economy “as we exported more than 1,300 containers of materials and services for the execution”. The construction company, says Camara, has trained local staff of more than 1,000 employees with modern construction techniques, transferring technology and bringing high quality employment in Ghana.
He explains that ECA support can trigger important benefits for the country. In the case of Phase 2, now with the support of UKEF, Contracta Brazil established an independent British Company, Contracta Construction UK Ltd, with operational offices in London, to serve as an export hub to Africa, generating employment in the UK and promoting a great amount of exports of UK materials and services. During its two-year life so far, this subsidiary has been awarded a number of projects in Ghana, generating revenues, employment and exports in the UK while continuing with the important social benefits in Ghana with the new infrastructure projects generating local employment, transfer of technology.
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Global Head of Structured Trade and Export Finance | Deutsche Bank
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