Construction companies in Ghana have cautioned that massive job cuts are imminent if nothing is done to tame the surging lending rate of commercial banks in the country. Standing at 40%, the lending rate has forced many construction companies to close business.
Some construction companies in the country have opted to borrow from outside the country to sustain their businesses. Apart from high interest rates, the rising cost of building materials is also scaring away new entrants in the construction business.
Lending rate in Ghana increased to 38.30 percent in March this year from 33.85. It reached an all-time high of 38.84 percent in August of 2014 and a record low of 21.24 percent in March 2008 but some economists have said the current commercial lending rate hovers around 40 per cent.
Economists now say that Ghana’s high lending is unfriendly for business growth,” especially at a time when the government banks on the private sector to boost economic growth.
The slump in construction activities in Ghana will have a direct implication on housing projects currently ongoing in the country. The country’s housing deficit is projected at 1.7 million, and estimated to grow to 2 million by 2018.
Analysts and industry players blame the shortage on increasing population, poor planning on the part of the government and rapid urbanization and limited private sector involvement in the county’s quest to boost affordable housing.
Real estate developer in Ghana Frank Aboagye Danyansah regrets that many Ghanaians are not able to get mortgages to buy a house because they are highly priced.
The 2015 National Housing Policy in Ghana, defines affordable housing as the ability of a household to spend up to 30 per cent of its gross annual income on rent or purchase price on housing, where the rent or purchase price includes applicable taxes and insurances and utilities.
However with the current lending rates warns Danyansah, the recent gains on affordable housing will be hampered. He now calls on policy makers on financial matters to intervene or else a major crisis in the construction industry in Ghana looms.
But President John Dramani Mahama announced last year that the bid to tackle the housing problem in Ghana is being supported not only by the government but also through various forms of private sector participation.
For now it remains to be seen how the government responds to the high lending rate that has first hit construction companies in Ghana.
