Market Makeover

Trade Finance

Market Makeover

September 2019

Thanks to some transformational lending, Ghana’s Kumasi Market is undergoing a makeover that is set to transform the Ashanti economy and all it touches. flow tells the story of a project involving three governments, a Brazilian 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 Kejetia area of Kumasi.

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 Otumfuo Osei Tutu II.1 With Phase One being complete, the royal visit marked an important milestone for Ghana in terms of its ongoing infrastructure strategy.

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The Kumasi Market is the largest market in West Africa and not only serves the Kumasi region, but also acts as a magnet for traders from neighbouring countries such as Benin and Togo. It is also a major tourist attraction and features in most guidebooks about Ghana. Before its redevelopment, it comprised more than 12,000 stores and stalls, with footfall of around half a million people a day.

 

New Kumasi Market phase
Inside the new Kumasi Market roof structure towards the end of Phase One

Looking rather like a shanty town when viewed from above, the market had suffered from regular outbreaks of fire. These resulted in the destruction of stalls and loss of livelihood, not to mention strain on the emergency services, given the thousands of daily visitors. Other difficulties included food hygiene maintenance, deliveries and crime prevention, 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”.2

The level of investment needed to close what the government terms “the infrastructure gap” has meant that private investment and public-private partnerships such as this one are seen as “indispensable to address this financing gap and to improve the quality of infrastructure services”.

 

Access to the old market is reopened in February 2019
Access to the old market is reopened in February 2019 ahead of the new Kumasi Market inauguration
"When we both support British exports and support development in a country, it’s a great combination"
Louis Taylor, CEO, UK Export Finance

This article tells the story of the success of a different sort of partnership (debt rather than equity-based) involving Deutsche Bank in four different locations (Dubai, London, New York and Brazil), Brazilian construction company Contracta Engenharia Ltda, and the governments of Ghana, Brazil and the UK via their respective export credit agencies (ECAs). Brazil’s Guarantees and Fund Managements Agency (ABGF) acts on behalf of the Brazilian government, represented by the Ministry of Finance’s Secretariat for International Affairs (SAIN). Similarly, UK Export Finance (UKEF) as part of the UK government’s Department for International Trade supports exports with loan guarantees. Together, they are transforming Ghanaian society.

 

Project overview

In February 2015, the Parliament of Ghana approved a US$270m 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 covered facility from SAIN, the Brazilian ECA, 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 Two of Phase One of the Kumasi Market redevelopment project. Contracta had established a foothold in Ghana with the successful completion of the Accra aircraft hangar project in 20123 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.

 

Aerial view of Phase One of the new Kumasi Market exterior
Aerial view of Phase One of the new Kumasi Market exterior

500,000

Visitors to Ghana’s Kumasi Market each day

At the end of 2018, the funding for Tranche One of Phase Two of the project was signed between the Ministry of Finance of Ghana (the borrower) and Deutsche Bank, for €92m. 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 UKEF guaranteed a €80m facility on a 12-year tenor, with the remaining €12m being a commercial loan on a five-year tenor.

UKEF, formerly the UK’s Export Credits Guarantee Department, celebrates its centenary in 2019, and CEO Louis Taylor explained on Trade Finance TV4 that he had just returned from Ghana and the new-look market would “allow the character of the market to flourish, but with running water and refrigeration”. He added that UKEF was also supporting the redevelopment of the airport – thus helping air cargo trade – and a new neonatal hospital. “When we both support British exports and support development in a country, it’s a great combination and something we would love to do more of,” said Taylor. The ECA has been busy; it has recently provided support of around £1.2bn for the construction of three hospitals and power infrastructure upgrades in Angola, two new power stations and 14 substation upgrades in Iraq, and 250 rural bridges in Sri Lanka.5

 

Trade Finance TV Presenter Clarissa Dann
Left to right: Trade Finance TV Presenter Clarissa Dann with Contracta Engenharia CEO Fabio Camara and Deutsche Bank's Head of Structured Trade and Export Finance UK, James Pumphrey

Community re-energised

Also appearing on Trade Finance TV was Fabio Camara, CEO of Contracta Engenharia, with James Pumphrey, Head of Structured Trade and Export Finance UK at Deutsche Bank.

Sporting a tie reflecting the geometric Ashanti culture (also to be found in the architecture of the new market design), Camara said that in all his 19 years as a civil engineer, “this was one of the most challenging, but also most rewarding, projects that I’ve been involved in.” This was not down to the technical aspects of the construction itself, but to the large array of social demands and considerations for the designs that needed to incorporate the local culture and organisation on the existing market.

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 the time. He recalls that the mayor had sighed: “I hope you are not the 10th company that comes here, assesses the situation and never comes back again.” This struck a chord and laid down a challenge. That day, Camara gave his personal assurance that he would return. “And so I did, a few months later, with a complete technical conceptual proposal of what is today the finished Phase One of the Kumasi Central Market.”

With a lot of moving parts – particularly all the social demands around the market – the technical proposal for the project was easier said than done, but “despite the difficulties”, Contracta Engenharia reached agreement with the government to start the project.

 

Completion of the market stall infrastructure in Phase One of the new Kumasi Market
Completion of the market stall infrastructure in Phase One of the new Kumasi Market
"This was one of the most challenging, but also most rewarding, projects that I’ve been involved in"

Fabio Camara, CEO, Contracta Engenharia Ltda

Apart from the market itself, the project comprised a reorganisation and upgrade of the surrounding roads and drainage; a sewer treatment station to treat 100% of the sewage generated by the facility; a large crêche for the children of women working in the shops; a clinic to attend to the needs of users; a police station; a fire station; a post office; proper infrastructure for the restaurants, with gas supply facilities and supplied industrial stoves for each one; and proper infrastructure for the fish and meat shop owners, with ice-making machines, freezers and refrigerated displays. The project has become akin to a not-so-small city within the central business district of Kumasi.

 

Financial support

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 Phase One. 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 more than 1,000 local employees in modern construction techniques, transferring technology and bringing high-quality employment in Ghana.

“We were following our exporting client out of Brazil – we had done a transaction with them in 2014,” reflected Pumphrey on Trade Finance TV. He explained how the project had to be phased into tranches so that it aligned with the Ghanaian government’s overall budget and priority listing – it could not be done in one go. “For the first phase, where much of the equipment came from Brazil, the Brazilian government supported the exports through SAIN, its ECA. Brazil is developing a relationship with Ghana and is keen to support South-South trade.” He explained that ECA support can trigger important benefits for the country. Phase Two, now with the support of UKEF, via Contracta Construction UK Ltd, serves 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 as the new infrastructure projects generate local employment, as well as the transfer of technology.

 

World-class city

As King Otumfuo celebrates the 20th anniversary of his ascension of the Golden Stool in April 2019, it appears that his determination to ensure the transformation of Kumasi into a world-class city is well under way. He was seen to be nodding in general approval (although did not make a statement) during an unannounced visit in mid-February 2019 to various Kumasi projects, including the airport redevelopment and the Kumasi Market.

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.

This is just the beginning.

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Sources

1 See
https://bit.ly/2JPDZE6 at modernghana.com
2 As explained in the Ghana Infrastructure Investment Fund infrastructure policy statement at
https://bit.ly/2FA6QbE, mofep.gov.gh
3 See
https://bit.ly/2G247Xz at contracta.com.br
4 See
tradefinancetv.net
5 See
https://bit.ly/2VwNhpZ at gtreview.com

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