Market makeover – financing the new Ghana Kumasi Market

Fabio Camara, CEO of Contracta Engenharia Ltda and James Pumphrey, Head of Structured Trade and Export Finance UK at Deutsche Bank talk to Trade Finance TV about how they made the US$259m revamp of Ghana’s Kumasi Market happen (full interview)

As we saw in our previous episode of Trade Finance TV, Ghana’s Kumasi Market is undergoing a complete makeover, and the 500 visitors to the largest uncovered market in West Africa will soon having a much more positive shopping experience.

We now hear from Fabio Camara, the CEO of the Brazilian construction company Contracta Engenharia Ltda, and James Pumphrey, Head of Structured Trade and Export Finance UK at Deutsche Bank who explain how the finance for this complete US$259m project was put together. It was actually phased in two tranches so that it aligned with the Ghanaian government’s overall budget and priority listing.

“We were following our exporting client out of Brazil – we had done a transaction with them in 2014, says Pumphrey. The first phase saw much of the equipment coming from Brazil, so the Brazilian government supported the exports through SAIN, its export credit agency. The second, supported by UKEF (outlined by CEO Louis Taylor in the previous episode of Trade Finance TV) sees equipment and services being exported from the UK to Ghana.

Camara, a civil engineer, is clearly absolutely passionate about the project and its social impact – he had first visited Kumasi in 2012 in response to the government’s request to find a solution to the less than ideal conditions on the ground at the time such as fires and power shortages (observant viewers will note the geometric Ashanti pattern of the tie he is wearing).

Transcript of interview:

Clarissa Dann Welcome to Trade Finance TV, your insight into the global trade climate for importers, exporters and their financiers. I’m Clarissa Dann.

In this episode we’ve got Fabio Camara, chief executive of the Brazilian Civil Engineers Contracta Engenharia Ltda, and James Pumphrey, director of Structured Export Finance UK at Deutsche Bank. They’re going to tell us about how the building and the financing of a new Kumasi Central Market in Ghana came about and how it’s getting on.

Fabio and James, welcome to Trade Finance TV.

Fabio Camara Thank you very much. It’s a pleasure to be here today to discuss some of our projects in Ghana.

James Pumphrey It’s wonderful to be here, Kaluza, and likewise to talk about Ghana and our exploits down there.

Clarissa Dann Well, moving on, I’d like to hear a bit more about that tie you’re wearing, Fabio. There’s a story there, isn’t there?

Fabio Camara Yes, thank you. Even when we started with the markets, we got immersed in all the Ashanti culture. So I got some aspects of a very interesting culture, the Ashanti culture. So I also like to wear parts of the clothing that is typical to the region there.

Clarissa Dann James, perhaps you can give us a bit of an update on the context of all of this and what we were doing in Ashanti in the first place.

James Pumphrey Well, we were following a contractor, our exporting client out of Brazil. And we did a transaction. We financed the transaction back in 2014, which I’m sure Fabio will talk a bit more about the technical side of it. And since then, we’ve been following into three phases of financing with the particular market in Kumasi, and we have the final phase supported by UK export finance.

Clarissa Dann We were hearing about that earlier. Now, Fabio, you first arrived in that region in 2012 because you were doing some aircraft hangar finance building?

Fabio Camara Yes, we started in Ghana, in Accra with the first project. It was a hangar for the Air Force and then based on our performance there, we were challenged by the government to go to Kumasi. They had this big issue there with the market which is very large. Every year, they have a couple of fire incidents. There are a lot of shops that get burned and it’s very distressing for the population. So we were called there to assess the situation and try to come up with with appropriate technical solutions to solve the several issues that they have there.

And it was a very interesting and demanding process, not only in the terms of the civil construction itself, but also to incorporate and to assess all the social demands and how they operate the market. So we could incorporate our designs as well as keep the traditional way that they do business within the new market that we were proposing. And we proposed it and we actually executed after some time.

Clarissa Dann I remember you telling me that you were actually almost given a dare by the government, weren’t you? ‘Don’t you be another one that sort of comes up with a great idea and then never comes back.’ You actually dared to come up with something concrete that would actually work and see the light of day.

Fabio Camara Yeah, that was interesting because I was the first one to go personally there and when the demand came. So I went there and we had the first meeting there with the mayor of the munincipailty, and that was his challenge because apparently more than 10 different companies throughout the years had gone there and looked at the situation and just vanished. Because the challenge is not specifically on the civil construction itself, but all the social demands around the market are very large, so for a contractor to go there and undertake such a huge challenge, it was very difficult for them to to find someone that they could engage for that.

And on that day, I gave him the assurance that, yes, that I would come back. And even with all the challenges and difficulties, we came up with a technical proposal, and after all the discussions, we came to an agreement with them to start the project.

Clarissa Dann James, could you tell us a bit more about why the Brazilian and the the UK export credit agencies were so keen on this?

James Pumphrey Absolutely. So when we looked at the first phase and the first tranche of the first few months, because this project had to be, from a financing perspective, it had to be phased into tranches. Because it had to fit within the Ghanaian governments overall project budget and their priority listing. So they couldn’t commit to do the whole transaction, the whole market in one. So we phased it into various phases, which then had to fit with the technical and commercial aspects.

So in the first phase, the Brazilian government was involved because the contractor was really contracted with Brazil and SAIN, the Brazilian export credit agency was hugely involved in this. And much of the equipment came from Brazil itself, so it was supporting Brazilian exports and the other side of the coin is that Brazil was developing a relationship with Ghana as well. So they were keen to be seen to be facilitating that trade between Brazil and China.

When t cam to the second tranche of the first phase was financed on a pure commercial basis, because it was mainly local stuff. And then the second phase, which we have just financed and signed the financing for at the end of last year, and it’s just going through the conditions precedent, that is using contractor UK subsidiaries, which is therefore procuring from the UK a significant amount of services and goods as well that will go to the build of the second phase of the market. And that’s where UK export finance step in because they’re protecting and supporting UK jobs.

Clarissa Dann Can you remind us what the value of the whole project is all together?

James Pumphrey Yes. So I think the first the first phase, the two tranches is about 260 million dollars. And we’ve just financed with UK support and that’s about 92 million euros. And then there will be a second tranche to the second phase as well. So it’s a mammoth undertaking and fitting in with the Ministry of Finance that’s acting as the BOE for this financing within their budgetary restrictions and their priorities. Obviously, Ghana has a lot of priorities, but this is absolutely front and central because of the social impact, improving the lives, not only of the people who work at the market, but also the people who live and use the market on a daily basis.

Clarissa Dann It’s an attraction on TripAdvisor.

James Pumphrey I think people do go there to literally buy stuff in the market. And having been there myself and seen the construction of the first phase, the completed construction, and then looked out over into where the market is at the moment, and it’s sort of a shanty town, it will be an amazing place to be able to go to when it’s up and running fully.

Clarissa Dann Where are they gonna be 45000 stores?

Fabio Camara By the end will be a total of 25000 shops. So the first phase we have that we just finished last December, we have 8800 shops. Now the second phase will have roughly 10000 more shops. And then we’ll have still a third phase, which will add the remaining 7000 shops, or then we’ll reach 25000 shops, with a total constructed area of nearly half million square meters of constructed are, so it’s a very large facility.

Clarissa Dann Can you remind us what the actual materials were that the Brazilian government was supporting in terms of the exports and the content? Was it steel? Was it parts or machinery? Remind us what it was.

Fabio Camara Yeah, even when we started the designs, we made sure that the construction method would be able to incorporate the export materials. So the whole structure is a steel structure, which was exported entirely from Brazil. Also, all the partitions, the installations and the furnishings, most of the materials were exported from Brazil for the phase one.

We shipped during the two year construction period, more than 1300 containers of materials. So there was another challenge and a logistical challenge that we had to overcome. And now going on to the phase two and now we’ll have the support of the UK export finance. The same will all be happening here in the UK. So we have now our office is in London. We have our procurement department based here. So all those materials now will be procured here in the UK. Actually, we just started another project on the Kumasi Airport in the same region, which is also backed by the by the UK Export Finance. So we already engaged several suppliers here for the steel structure and probably the same suppliers now will be engaged for the supply for the market.

Clarissa Dann There’s also services as well?

James Pumphrey Services, and also insurance and so on. And I think the one other thing I’d say is looking at the UK export finance side, because of the flexibility of their support, they don’t require 100% of the project to be sourced in the UK, because you know 25-35%, so that attraction to contracts with using UK is partly, they don’t have to employ everything in the UK, but from the UK export finance side at least there’s an increase in exports that otherwise wouldn’t occur from the UK.

Fabio Camara And also, there is one interesting aspect that, according to the minimum criteria of UK content, we could still be operating with the Brazilian contractor and only supply the materials, these 30-40% of  UK content. But we decided even to show more support for the UK support to actually establish a new company, a local British company, so we have a subsidiary here so that the EPC contractor is a contractor in the UK and not more of a contract in Brazil. So apart from sourcing all the materials from the suppliers here in the UK, we also perform the services with all the machinery that we already acquired here in the UK and mobilize together with our UK subsidiary. So the minimum content, they should start from 20%. Actually, we will reach much more than 50% of UK content with this project.

Clarissa Dann That’s very, very good. And it was so good that it did spark a royal visit, not only from the UK, but also from Ashanti itself. Could you tell us a bit more about that?

Fabio Camara OK, so the market there, we have roughly more than a half million people going to the market every day. And we even had some doubts in the beginning if that number was real or if it was just an estimate. And we actually did for three months, two months, we actually did measurements on the ground and we confirmed that we have from 500.000-600.000 every day going to the market.

Also looking at the content, apart from the 50 to 60 percentile UK content that we have, we have roughly 25%t also of local content. And with that we also have our social responsibility. As a company, we engage more than 800 employees in Ghana, hired there locally. And we offer training and we try to transfer technology, training all the local staff also with new building technologies. And now we have a very trained local team also that we are engaging in all the new projects.

Clarissa Dann So you’re not just sending in Brazilian workers to do it all themselves. You’re transferring that knowledge, which is great. This all goes back to what Louis was talking about earlier, wasn’t it, about adding value in the continent.

James Pumphrey And I think to the point of your question about the king visiting, you know, the market itself is an enormous structure which is visible from quite a long way away in the city. So it is obviously a major undertaking and a lot of movement of people done in a very sympathetic way. So the king visiting the site was a sort of applause and tribute to the success of the first phase of the project. My understanding is that the land on which it was built, it used to be called the Prince of Wales Drive or Prince of Wales Park. So it was nice to see the Prince of Wales on his recent visit to Ghana to visit the site.

Clarissa Dann There’s a picture of you with him, isn’t there?

Fabio Camara Yes, and also the Ashanti King also following up the developments down on the market. So roughly two times per year, he also pays a visit to the construction site. And so he is following up as it’s a very important facility and development for his community. So he is also following up and making sure that it will be a great success for his people.

Clarissa Dann Now, this is a very important question. When can I go shopping?

Fabio Camara So the first phase we just handed over last December so now the municipality is working on all the social re-allocation process to determine who will go to each shop. So in the next couple of months, that process will start. So we’ll start the actual operation on the first phase of the market and then immediately we are moving to the start of the construction of the second phase. So as we move roughly 8000 people from the current market to the new market, that we just built as phase one, this new area will be free for us to demolish these 7000-8000 shops and then start the construction.

And then as we did on the first phase, as all the designs are already finished, our plan is to acquire, let’s say, in the maximum period of six months, 100% of the materials, and then we ship everything and the stock there in Ghana, so we don’t depend too much more on the logistics and we can conclude before our scheduled deadline of 24 months. So within the next few years, we should be moving to inaugurate the second phase of the market.

Clarissa Dann Wow. So from a conversation in 2012 to it all being complete in 24 months, that’s amazing. Were there any heart stopping moments when you look back at where you’ve come from and what’s been achieved so far? At any point did you think, oh, my goodness, this is actually going to be okay? Or were you supremely confident all the way through?

Fabio Camara We didn’t have any major incidents or setbacks. The challenge in the beginning was when going to the actual designs to incorporate all the cultural elements and to address all the social needs for all the associations, we actually registered all the tenants that are currently working on the market. More than 30.000 people do business nowadays on the market so there’s the social aspects.

And also in Ghana, they had some bad experiences in the past of them starting to redevelop some markets, and then they started and they had no funds to finish. So then they relocated the people and then they couldn’t go back because they couldn’t finish their work. So there was some concern within the community in the beginning about that, but that was also when the Ashanti King stepped in and assured the population that he was personally monitoring the process, and that we would get to the point that we are today of finishing the phase one so that everyone can be relocated and continue with their business.

Clarissa Dann And James, as a financier of this project, how do you feel about the progress so far?

James Pumphrey I’ts been fantastic. Well, we are being repaid on phase one, which is always, I don’t think we ever had any doubt that that would happen. I think the important thing is that the phase during this period from 2012 to now, we’ve had at least one, if not two changes of government. And yet even the central government, the continual support for this project shows how important it is to the government and to the ministries down in Accra, never mind up in Kumasi.

I mean, I have been to the site, the work that contractor and the local community have done on the sort of environmental and social impacts. I mean, this had a major impact upon the people working there initially, and they’ve adjusted and they will move back into something that is clearly going to be very positive for them. And from Deutsche Bank’s perspective, you know, that’s really important. We’re involved in the financing of a project which is just going to be fantastically beneficial for the local community. It will generate a little bit of revenue as well, I think. So it’s you know, it’s not completely social development, but you know, it is a massive improvement to the lives of the people. And that’s the sort of project that we at Deutsche Bank, like to be involved in.

Clarissa Dann Fabio, james, thank you so much for coming in and telling us all about this market.

Fabio Camara Thank you. It was a pleasure to be here and share our project.

James Pumphrey Thank you, Clarissa.

Clarissa Dann Thanks so much. And it’s a big thank you to Fabio Camara and to James Pumphrey for their insights into the commodity market project in Ghana. And of course, thank you to all of you for watching. To catch our monthly reports on other markets or to subscribe to our newsletter, go to TRADEFINANCETV.NET.

Published on May 7, 2019

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