Oil and mining belong to the extractive industry, where they have a massive impact on the global economy. Ghana is no different.
Formerly called the Gold Coast due to its vast wealth of natural resources, the country has benefitted immensely from the extractive industry. The Ghana Statistical Service indicates that the industry contributed a combined total of 15.2 percent to the country's gross domestic product (GDP) in 2014. It is instructive that the mining and quarrying sectors were the fourth highest contributors to the country’s GDP in that same year.
With a combined GDP total of over GH¢16 billion in 2014, the extractive sector will remain a key contributor to Ghana’s growing economy. One of the many industries in the country that has been impacted by the extractive sector is the real estate market. Evidence suggests that areas engaged in commercial mining or oil activity have seen an upsurge in real estate activity. This impact has come from indirect investment, with the sector attracting local and foreign property investors looking to meet accommodation needs.
Accra’s real estate market is on the rise
Ghana’s first oil production in 2011 led to a sharp growth in real estate. From a 0.2 percent growth in 2009, the real estate sector bounced back in style with a 13.9 percent growth in 2010. A property boom culminated as a result in the nation’s capital, Accra, leading to the capital being ranked among the top ten real estate hubs in Africa (Knight Frank’s 2015 Africa Report). Data from property portal, Lamudi, confirms this, with the median rental price of an apartment going for about GH¢3,000 per bedroom per month. This suggests that high demand is driving up property prices, making it an attractive destination for investors.
With Accra titled as the commercial hub of Ghana, all the extractive industry players have established their headquarters in the capital despite carrying out their operational activities in other parts of the country. This has created an opportunity for residential and commercial real estate development in the city.
Informal housing boom
The capital is not the only place to benefit from mining and oil sector investment. Many towns located in close prosimity to operational sites have been affected the industry. The New Abirem District is one area that has been impacted by the presence of Newmont Ghana, a leading mining company. The presence of Newmont in the area has scaled-up investment in infrastructure. From schools to roads, health facilities to homes, Newmont has provided many families with new homes as part of its resettlement agreement. The mining company also invested in a housing estate which serves as accommodation for its top and middle management employees. Investment in informal residential housing has also increased in anticipation of workers in the area.
AngloGold Ashanti’s operations has also had a positive impact on surrounding towns. The world’s largest gold mining company has a relocation project underway, with plans to construct 70 housing units in Mankessim, Western Region. Obuasi, which was the company’s first area of operations was a greenfield site prior to its establishment in the nineteenth century. Today, it is home to thousands of individuals, though most of the real estate is provided by the informal sector. The mining giant however has developed housing estates to cater to the needs of top and middle level staff.
Tullow’s presence in the Western Regional capital, Takoradi has equally seen a surge in real estate activity. Like all other mining and oil companies in the country, Tullow has developed an estate that houses some of its staff. Other staff are expected to house hunt in both the formal and informal sectors. Though the informal housing market far outstrips the formal sector, a number of developers have moved into the twin city to take advantage of the growing opportunity. The Takoradi Municipal Assembly also announced plans to release large tracts of land to investors to encourage the development of affordable housing in the city. These steps bode well for real estate in the country.
The extractive industry has been a boom to the country’s economy over the years. However, it can lead to some unfortunate circumstances if steps are not taken to prevent them. The mining town of Akwatia in the Eastern Region is a clear example of a town that has been negatively impacted in the long run. Formerly a commercial hub before the 1990s, the town has been characterized with obsolete infrastructure due to the diminishing diamond deposits. Investors are skeptical to invest in the town and is leading to increasing levels of emigration. Lessons can be learned from the Akwatia to avoid repetition. A strong focus on diversification is key to ensure the stability of mining towns in the country.