One of the world’s richest men and a member of the Saudi royal family has received approval for a $26 million loan from a branch of the World Bank to build a luxury hotel in Ghana, a West African nation with a developing economy but where 40 percent of the people live in poverty.
Prince Al-Waleed bin Talal, also known as Prince Walid, is a nephew of Saudi Arabian King Abdullah bin Abdul-Aziz. With a net worth of $19.6 billion, according to Forbes magazine, he is the 26th richest person in the world.
Yet his company was able to borrow $26 million to build a five-star hotel in Accra, the capital and largest city in Ghana, from the International Finance Corp. (IFC), part of the World Bank Group, under a program to encourage private development in developing nations.
The IFC, whose largest shareholder is the United States, approved the loan in December to KHI Ghana Ltd., a 100 percent-owned subsidiary of Prince Walid’s company, Kingdom Hotel Investments (KHI), for the development of the five-star Movenpick Ambassador Hotel in Accra. The formal loan commitment papers were signed in February, and the IFC is expected to disburse the funds for the nine-year loan soon.
The $103 million hotel with 259 rooms will be along one of Accras major thoroughfares and adjacent to several large commercial developments in the citys central business district. The site was occupied by the Ambassador Hotel, a gift from the United Kingdom to Ghana in recognition of the countrys independence in 1957. The hotel closed in the early 1980s.
The IFC also helped arrange another $20 million for the project from a syndicate of commercial lenders, the agency said.
Desmond Dodd, IFC spokesman in Africa, said the bank is supporting “a project with strong developmental impact in Ghana.”
He said the low-income country needs better infrastructure to attract more investors and create jobs and that KHI Ghana Ltd. approached the IFC for the money at a time when global financial markets were in turmoil and not making loans.
“This project will directly create jobs related to the construction and the eventual operation of the property,” said Mr. Dodd. “The hotel will have large indirect impact as well. The hotel is expected to source almost all of their food and nonfood purchases locally, thereby providing increased business opportunities to a wide range of local suppliers and subcontractors.”
Mr. Dodd said while Africa has not been on the map of global investors for many years, the IFC is helping to change that.
When asked how the IFC justifies a loan to one of the world’s richest men, Mr. Dodd said the agency provides financing to private projects that have large development impact in the host country, and that such private-sector projects require sponsors with the capacity to provide capital and management.
He said Prince Walid and other investors can choose where they put their money and the “IFC’s role is to ensure that investors that want to do business in some of the world’s poorest countries can make investments with high standards.”
Critics question whether a multimillion-dollar loan to a company owned by a billionaire to build a luxury hotel in Ghana would provide much help for poor Ghanaians.
Sen. Patrick J. Leahy, Vermont Democrat and chairman of the Senate Judiciary Committee, has asked the Treasury Department for information from the IFC about the loan. The request was made in his role as chairman of the Senate Appropriations subcommittee on state, foreign operations and related agencies, which has jurisdiction over the IFC and the World Bank.
“The loan, the project and the project participants give rise to obvious questions, and Sen. Leahy is asking for the answers,” said Leahy spokesman David Carle. “He agrees that critics of this project raise some valid points that should be examined further.”
Bruce Rich, a Washington-based public interest attorney who has served as senior counsel on international issues for major environmental organizations, described the IFC loan for a luxury hotel in Ghana as “particularly grotesque.” He said the World Bank says its mandate is poverty alleviation and that it claims to be a leader in helping the poor.
“Unfortunately, the IFC has financed numerous four- and five-star hotels in the world’s poorer countries for years despite a long record of international and U.S. bipartisan congressional criticism of such misuse of scarce development assistance,” Mr. Rich said.
“This kind of loan is nothing else but the worst corporate welfare — Prince Walid and his company can certainly find credit from private international banks, if this is an economically viable project,” he said, adding that the World Bank and the IFC last year sought a large capital increase from the U.S. and other nations to be used in part for “targeting the poor and vulnerable, especially in sub-Saharan Africa.”
“Prince Walid and the patrons of a luxury international hotel appear to be what the IFC views as the ‘poor and vulnerable’ deserving of international corporate welfare,” he said.
David Hunter, a law professor at American University who has studied the World Bank, also questioned how the loan carried out the IFC’s goal of helping the poor.
“Where is the value added for the poor?” asked Mr. Hunter, who said a luxury hotel would only create some temporary construction jobs and low-paying service positions and that all the hotel’s profits would go overseas. “It is a pretty weak form of development.”
J. Peter Pham, director of the Michael S. Ansari Africa Center at the Atlantic Council of the United States in Washington, said hotels and private financing are already available in Ghana.
“I could see if they were lending in Juba, South Sudan, where there are only two hotels, but Ghana?” Mr. Pham said.
Lourie Kruger, KHI vice president and group treasurer, defended the project, saying it would result in “an important resource for businesses and travelers in Ghana.” She also said it would “create many local jobs” during its construction and operation.
“We were pleased to be able to continue planning for this project and secure financing, even during uncertain times in international markets,” she said.
Tourism has lagged in Ghana over the past several years, but the government said it is committed to supporting its development and had initiated a number of measures to do so.
Ghana’s fortunes also have improved in the past few years with the discovery of oil in the deep waters off its coast, which the IFC said had increased Ghana’s need for more business infrastructure such as hotels.