The Government's Affordable Housing and National Mortgage Scheme: A Good Example of Public-Private Partnership and Matters Arising

The Government of Ghana announced plans to implement some interventions in the housing and housing finance markets in its 2019 budget last year. A GH¢1 billion mortgage fund was to be established to leverage private capital to provide affordable houses for the populace. The fund aims to expand access to housing and deepen the local mortgage and construction finance market to help bring down the housing deficit, which is estimated at 1.7 million units.

A few months after, it appears the government's affordable housing and national mortgage scheme is starting to generate some good results. Here we have, perhaps, for the first time, 1 and 2-bedroom houses going for as low as GHS140,000 (US$25,000) and cedi-denominated mortgages priced as low as 12% per annum by some of the participating financial institutions. This is perhaps the closest to the definition of affordable housing in the history of Ghana! The last time I checked the housing market, Blue Rose was the only developer among hundreds of developers supplying houses at that 'affordable' price point. This is a clear example of how the government could work with private interests to reduce the housing and housing finance challenges of the average Ghanaian - Public Private Partnership.

Government by its nature could obtain cheap funds than private organisations because of the relatively low risk associated with the former. The Government's intervention by way of this housing scheme and the 'off-taking' of the specified housing supplies by the selected developers has effectively removed the risk, uncertainty and the long holding period developers face in selling their supplies. In effect, this intervention has in part reduced the high interest cost on development finance faced by developers during the construction phase and the marketing phase which traditionally follows. Kudos to the Government!

While we congratulate the government for this housing and housing finance initiatives, two policy clarifications are needed. First, the description "public servant" should not be a basis for receiving a government subsidy since it may be an unfair discrimination against citizens working in the private sector. This is valid especially when government cannot employ everyone and the resource may be inefficiently allocated to public servants who do not need it. For example, the CEO of Cocobod, whose monthly salary is over GHS70,000 cannot be considered as needing government support purchase a house. This applies to many heads of public institutions and other public servants. There are also many other public servants who are already homeowners. Knowing the importance of homeownership to the prosperity of households and individuals, others should, therefore, be given the opportunity to be homeowners too. Else, the scheme could engender some unintended consequences like deepening the already scary inequality gap between those who have and those who don't! There is, therefore, a need for transparency and a clear policy guideline that positively discriminates among public servants in this regard.

Second, it will be interesting to know how the "interest rate subsidy" on the mortgages is going to be managed. The subsidy is the difference between what these public servants would obtain in the free market (approximately 30% per annum for cedi-denominated mortgages) and what is on offer by the selected banks (12% per annum). That is about 18% per annum!

This subsidy entitles the state to an equity position in these houses. In other words, the state is in theory a part-owner ('joint-owner') with the public servants who are going to buy these houses unless designed as debt to be repaid by the latter over time. However, historically, subsidies of this kind associated with government housing schemes in Ghana have been given to buyers as FREE LUNCH and often times as REWARDS to political party cronies, without government recognising such interventions as equity or debt investment to be recouped in some form later. Such an approach is an inappropriate and unsustainable way of administering subsidies.

The welfare function of the state is to ensure that citizens have adequate and decent shelter and not to give out free houses to citizens (especially those who could afford) and when the resources are not enough for all. Recognising that public resources are limited, the approach in the management of housing and housing finance subsidies in other countries (i.e Singapore, UK, etc) is that the government designs these subsidies as investments, which the beneficiaries have to pay back should they sell those subsidized houses (often at their market values) because they may no longer be in need of the subsidy due to their improved economic status. This enables the government to recycle the subsidy back into the fund and reallocate them to other people who need it.

The benefit of recycling subsidies is two-prompt; first, it removes the free lunch especially for those whose economic status improves over time, and second, it improves the sustainability of the subsidy funding mechanism. The government would not have to cough up huge sums of money to be disbursed as new subsidies.

It is my hope that this policy dimensions in relation to qualification for house and mortgage and the management of the subsidy will be given some deeper thought by the Minister and his team of experts.

Author: Dr Kenneth A. Donkor-Hyiaman is a Real Estate and Urban Economist and a Lecturer in Real Estate Finance and Real Estate Development at the Department of Land Economy, Kwame Nkrumah University of Science and Technology, Kumasi.

Learning to build Educational Institutions in Ghana is a Necessity: Caning in our Schools is an Institution the GES cannot wish away!

I just started following the emerging issue of the ban of caning in our schools by the Ghana Education Service (GES). So far, all the materials I have read points to the GES banning canning and suggesting alternative ways by which teachers could discipline their students. This is fantastic, considering the abusive nature of some teachers and the difficulty and high cost of regulating the use of the cane in schools.

The popular debate on this matter is whether a total ban is the best solution. Irrespective of whether a total ban or a mix of canning and the non-caning approaches are appropriate, there is an emerging view, which is missing in the current dialogues on social media. And it relates to whether teachers have the capacity to implement the GES prescribed alternatives for disciplining students. 

So far, I have not read in any of the publications that the GES is training teachers and instructors in the alternative approaches they have prescribed and how to apply them. I want to believe that some training of teachers has taken place or is ongoing and there is a clear policy on the continuous development of these alternatives before or after this directive was issued. 

I won’t, however, be surprised if the directive was issued without putting forth any plan for the training of teachers in the prescribed alternative disciplinary solutions. In my experience so far, I dare say that it is a common characteristic of institutions in Ghana! I am reminded of my days as a Teaching Assistant at the University in Ghana. My colleagues and I were not trained in the art and science of teaching. Therefore, we delivered tutorials based on our own experiences and observations of how our Teachers managed their mandates without knowledge of the best practices. There was and still is an implicit assumption in our higher education institutions that the good academic performance of Teaching Assistants was and is enough for them to teach or tutor others – their juniors!

Despite the lack of training, many Teaching Assistants do well in their mandate. Many are those who however turn the position into an opportunity to abuse their students and elicit personal gains through subtle blackmails beside others. Sex for grades is, for instance, common not just among Teachers and Lecturers but also among Teaching Assistants and Demonstrators! One Demonstrator in Statistics during my undergraduate studies blackmailed us (my class) to buy his pamphlet, else we risked getting low marks.

While searching for evidence of efforts by the GES and stakeholders including owners of school to build the capacity of teachers in these alternatives, I think it is rife to point out our great skill in issuing directives and making laws but lacking the capacity to enforce as reiterated by many legal luminaries like Ace Ankomah on many occasions.

It appears to me that the Authorities believe (assume) that once a directive is issued, the targeted stakeholders - in this case, teachers - have the capacity and resources to develop the REQUIRED skills. However, that is not the case in reality! Assuming that teachers have the capacity to unlearn and relearn, they may not have the resources, cash to the specific, to facilitate both initial and further training in these new prescribed alternative disciplinary methods. Thus, posing a sustainability risk to the use of the GES prescribed alternative disciplinary methods.

There appears to be a lack of understanding of how institutions develop and work. Like habits, institutions are 'sticky' and difficult to undo or change effectively without conscious and continuous capacity development (of stakeholders in the new ways of doing things). The GES cannot just wake up one day and ban caning in schools (which is a solution to some problems) without equipping the teachers with superior solutions. For many a Teacher, caning is a culture and perhaps, the ONLY disciplinary technique they know and have the capacity in delivering. Academics and practitioners like me can sit on the fence and criticize these Teachers and call them names in the manner of Professor Stephen Adei’s constant attack on them or get our hands dirty in finding effective and less abusive solutions to disciplinary issues even before they arise. Many of our Teachers are likely to revert to the easy and so-called inferior solution (i.e. caning) they are used to if we do not resolve the capacity challenges. 

Learning to develop institutions is a quality we need to develop as Ghanaians and as a nation. We need to prioritize and devote resources to researching how other countries have done it. Before I could set foot into the lecture room to deliver a tutorial during my doctoral studies at the Henley Business School, University of Reading, UK, I had to undergo training in the art and science of teaching, for both large and small groups; feedbacking, and how to provide research support to students.

I must say, I have become a better teacher today because someone deliberately developed a mechanism to ensure that I have the minimum skills to be effective in the classroom. My first class in my undergraduate studies and Cambridge education was good preparatory grounds for a Teaching Assistantship role but offered less opportunities to be a master in the art and science of teaching and learning. This is the situation of many teachers in Ghana! In a more open society such as England, the need for the teacher to develop skills in how to discipline and deal with recalcitrant students could not be over-emphasized. As Ghana liberalises the educational landscape and strives towards becoming a more open society, training and development of our teachers is s sine qua non!

The crux of citing these examples is that it is high time Teacher training and development in totality and in the prescribed alternative disciplinary methods in particular received more attention from stakeholders including the regulator - GES. Making directives is a low hanging fruit for any regulator. However, ensuring the effectiveness of the directive requires many and continuous dialogue to change the ‘archaic’ mindsets of stakeholders, resource development, proper design, and a deliberate attempt to operationalise, monitor and evaluate.

The Authorities must understand that regulation is costly and directives to adopt alternative disciplinary methods are not costless. Rather, such directives create and impose at least a financial cost on teachers and investors in schools if they are to be implemented. Professional development of teachers, therefore, has financial implications. And someone must pay for the cost of capacity development sustainably. We need to effectively incorporate these new disciplinary solutions into the training of teachers. My current readings of GES publications on the ban on caning and research does not suggest that these issues have been well addressed. A national dialogue on how to finance the professional and capacity development of teachers in general and in these alternative disciplinary methods won't be a bad idea!

By:

Dr. Kenneth A. Donkor-Hyiaman
Lecturer, Department of Land Economy, KNUST

Fellow, Think Oxbridge Foundation

Is the Learned Lawyer Kwame Akuffo still the Counsel for Menzgold? How Professionals have aided misbehaviour in Ghana.

At the Independence Declaration in 1957, Kwame Nkrumah said that Ghana is “free forever”. We may be free from the visible hands of colonial power but not the invisible and unethical hands of professionals. From scandal to scandal, Ghana has suffered at the hands of professionals, be it Accountants, Lawyers, Surveyors, Auctioneers, Auditors, Policemen, and Economists beside others. The recent bank crisis and the Menzgold issues underpin this concern. This brief article highlights how professionals have contributed to misbehaviours in Ghana.

Misbehaviour can be thought of as the opposite of ‘behaviour’, which is the range of actions and mannerisms made by individuals, organisms, systems, or artificial entities in conjunction with themselves or their environment[1], which includes the other systems or organisms around as well as the (inanimate) physical environment. It is the response of the system or organism to various stimuli or inputs, whether internal or external, conscious or subconscious, overt or covert, and voluntary or involuntary[2]. Misbehaviour is synonymous to bad behaviour, misconduct, and disorderly conduct.

Irresponsive and rent-seeking institutions and personal of public institutions have encourage misbehaviour among citizens. It is no news that bribery and corruption are the bed fellows of the Ghana Police Service. The Lands Commission is arguably one of the most corrupt public institutions in Ghana. The leadership and members of the Commission are Chartered Surveyors who are members of the Ghana Institution of Surveyors. This is a fact but does not suggest that these leaders are corrupt or have been caught in any corrupt act.  They however preside over an institution that is known to be rent-seeking and corrupt, one of the reasons for the many challenges in the lands sector.

The inflation of property values to enable borrowers obtain bigger loans is common among the Surveying professionals. The alleged inflation of the Chancery building (for an embassy) in Norway are all examples of this problem. A building that was sold for US$3 million in 2017 commanded an excessive open market value of about US$12 million in 2018. These are untouchable issues but the constantly emerge in private discussions. A value for money audit shows that the new Headquarters of the Lands Commission, which was awarded in 2016, was overpriced by about 18 million dollars. It follows a directive by the Senior Minister, Yaw Osafo Maafo, for a review of the Bill of Quantities and other relevant documents relating to the proposed Head Office Building.

Accountants, Auditors and the big four accounting firms – Ernst and Young, KPMG, PriceWater Coopers, and Deloitte were figured for negligence and the certification of financial statements that did not reflect the true positions of companies. Thus, aiding companies to misinform the public and investors about the true performance and health of many companies. These groups of professionals cannot be absolved of wrong doing in the case of the current bank crisis in Ghana. Auditors and Accountants have been blamed by analysts and regulators for the collapse of uniBank, Sovereign, Construction, Beige, Royal, UT and Capital banks, an issue the Institute of Chartered Accountants (Ghana) is investigating.

The recent Menzgold ponzi-scheme issues has also brought to light how Lawyers could be instrumental in misinforming the public and investors about the legality of a business. The Learned Lawyer Kwame Akuffo in particular has been instrumental in this regard. As Counsel for Menzgold, he has on countless occasions as reported in the media challenged the regulators – Bank of Ghana and the Securities and Exchanges Commission - about the legality of Menzgolds trade in collectibles. As a lawyer of reputable standing, perhaps, one of Ghana’s finest legal luminaries, his professional position on the matter provided customers of Menzgold and potential investors an impetus to continue investing. It was even the case that some customers accused the Government of using the Bank of Ghana to witch-haunt Menzgold based on the perceived ‘faulty’ legal interpretations of the learned Lawyer.

It has eventually turned out that Menzgold’s trade in collectibles is a Ponzi scheme. In that case, the promoters of the business including legal advisors may be culpable of deceiving the public. Even if it is not a Ponzi scheme and there is a lacuna which could lead to some regulatory arbitrage, one wonders which calibre of lawyer will advise a client to operate a business on such a scale without a license! I listened with surprise any time the learned Lawyer defended the illegal status of Menzgold’s trade in collectibles on the basis on some perceived regulatory arbitrage. As ‘notaries’, lawyers play a key role in any economy. One wonders whether his legal position could not be interpreted as negligence?  This raises interesting questions about what motivates professionals to accept jobs from companies. Pecuniary incentives could be a cause as was in a crucial reason for the relaxation of professional standards in the case of the 2007 Global financial crisis.

Don’t lawyers owe the public a duty of care? Increasingly, his affiliation to Menzgold is a been interpreted as a big endorsement for illegality and anarchy, an example that must be discouraged. Professionals must understand that there are so many people out there who admire them and follow and implement their opinions on public issues religiously. Therefore, they owe the public a duty of care, at least morally if not legal, to ensure that the right information is put out for public consumption. There is no doubt the existence of great legal minds in Ghana - the current President and the likes of Ace Ankomah, Asante Bediatuo, Ayikwei Otu, Kwame Akuffo, Kpebu, Philip Addison, etc. However, many lawyers in recent times have bemoaned how legal training in Ghana is constantly churning out relatively sub-standard lawyers compared to the lawyers of old. Is the legal profession therefore becoming a ‘market for lemons[3]’? I leave this question here for further discussion later.

As a student of Information Economics, I have learnt that information in itself has little value. The ownership of information, medium of dissemination and affiliates influence the value people place on the information. That is why professional opinion is held in high esteem. It is believed that these professionals have undergone the necessary and sufficient training to provide better advice than the untrained mind. To the extent that many customers of Menzgold believed the legal opinion of Lawyer Kwame Akuffo over the advice of the regulators, the learned Lawyer faced a greater responsibility to be right. However, history has taught us that professional certification although necessary is insufficient for quality detection in all cases. Low levels of professional development in Ghana thus has negative implications for quality detection. Perhaps, a reason for the increasing role of professionals in financial and investment misbehaviour in the country. There is a need to rescue the public from these professional misbehaviours.

By: Kenneth Donkor-Hyiaman, PhD.

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[1] Hemakumara, GPTS. and Rainis, R. 2018. Spatial behaviour modelling of unauthorised housing in Colombo, Sri Lanka. KEMANUSIAAN the Asian Journal of Humanities25(2): 91–107, https://doi.org/10.21315/kajh2018.25.2.5 Spatial Behaviour Modelling of Unauthorised Housing in Colombo, Sri Lanka | Request PDF. Available from: https://www.researchgate.net/publication/327864214_Spatial_Behaviour_Modelling_of_Unauthorised_Housing_in_Colombo_Sri_Lanka[accessed Sep 27 2018].

[2] Elizabeth A. Minton, Lynn R. Khale (2014). Belief Systems, Religion, and Behavioral Economics. New York: Business Expert Press LLC. ISBN 978-1-60649-704-3.

[3] A market where the quality of goods traded in a market can degrade in the presence of information asymmetry between buyers and sellers, leaving only "lemons" behind. In American slang, a lemon is a car that is found to be defective only after it has been bought.