Ghana: U.S.$2 Billion Chinese Loan to Bridge Infrastructure Gap - VP

6 September 2018

Vice President Dr. Mahamudu Bawumia, says the purpose of the US$2 billion infrastructure barter arrangement with the Chinese government through Sinohydro Corporation is to enable the government bridge the gap in infrastructure within the next few years.

He said the deal would enable the government accelerate the country's infrastructure development in the areas of hospitals, bridges, interchanges, roads, affordable housing, rural electrification, among others, and called on Ghanaians to support the deal.

"Cynics are throwing dust in the eye of the public about the viability of the arrangement. Like all multiyear financial arrangements, there are risks. Our strong technical team has been working out the details of the entire arrangement and running sensitivity analysis to determine our degree of vulnerabilities and the terms most beneficial for Ghana," Vice President Bawumia said when he delivered an address at the Ghana Economic Forum in Accra yesterday.

Explaining the arrangement with the Chinese government further, the Vice President said the deal sought to use a fraction of the country's rich bauxite deposits to get infrastructure needed in the country.

"What this arrangement does basically, is to say that we agree with Sinohydro that they provide us with our choice of infrastructure worth $2 billion.

"The Sinohydro Corporation which is going to provide the infrastructure is not the company that is going to mine the bauxite and they are not taking our raw bauxite. In other words, Sinohydro is not a mining company".

"Rather, government in our plans has set up a holding company backed by an Act of Parliament called the Ghana Integrated Aluminium Development Authority that will soon enter into a joint venture agreement with potential mining companies, aluminum refiners and off-takers to establish the bauxite mines and refinery," he said

Vice President Bawumia said although Sinohydro would be providing the infrastructure, Ghana would choose its own partner to set up the integrated aluminium development industry.

He said the partners for the mining deal could come from America, Australia, Canada, China, or any other country and indicated that once the government was confident of the capacity of the potential partners, it would then enter into partnership with them.

"After mining and refining, Government of Ghana will then use her share of the refined bauxite to pay-off whatever cost of the infrastructure provided by the Sinohydro Corporation. This will only happen after a period of three years and on condition that Sinohydro has completed the infrastructure projects that the people of Ghana has asked them to do."

"We have for years in Ghana, been in a situation where we just keep exporting our minerals like gold and diamond in raw form. We have not really leveraged these assets to develop the industries and value addition in Ghana".

"What we are saying now is 'let's not do the same to bauxite that we have done to gold, diamond and the rest. Let us find partners to set up an integrated aluminium industry in Ghana. Let's set up the refineries. The Valco Smelter is going to be expanded. It is a whole different structure we are implementing," he said.

The Vice President said the country's bauxite reserves were around 900 million metric tonnes, equivalent to US$50 billion and added that if the country decided to refine all of its bauxite reserves, it would be worth about $400 billion.

"Some people say 'what if the bauxite prices fall'? Well, we are talking about refined bauxite, not raw bauxite. But even if they fall we can still pay from our refined bauxite, because the reserves are so much more"

"Even in raw terms, we are talking of $50 billion, in refined terms its $400 billion. It is very important that we understand the kind of arrangement we are implementing. It has been carefully thought through," he said

Linked to the bauxite exploration and development drive, he said were beneficial spillovers that would accrue to the larger interest of Ghanaians and noted that the more jobs would be created within the entire value chain of the industry

He said a number of other smaller factories like caustic soda factory, and other factories would be established along the value chain.

"As part of the bauxite mining and refinery, we have started the processes to expand VALCO as the main smeltering facility for the alumina that will come out of the refinery. The good old VALCO is going to witness substantial uplift from its current position".

"We are also making serious efforts to revamp our railways and possibly extend them to Paga in the Upper East Region. We will be working on both the Eastern and Western as well as the central spines. As you can tell, work has already began on some of these lines," he said.

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