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Evaluation of the Proposed Integrated Aluminium Industry and the $2 Billion Chinese Barter Deal

Evaluation of the Proposed Integrated Aluminium Industry and the $2 Billion Chinese Barter Deal

The aluminium industry is projected to play a vital role in Ghana’s development trajectory. The value addition process to Ghana’s bauxite began with constructing an aluminium smelter, Volta Aluminium Company Limited (VALCO). A bauxite refinery, which converts raw bauxite into alumina, was required to complete the aluminium value chain. However, failed attempts to create a bauxite refinery has created the situation where refined bauxite (alumina) is imported to operate the smelter.

In 2017, the Government of Ghana announced its renewed effort towards creating an Integrated Aluminium Industry (IAI), which it has envisaged to be a pivotal contributor to government revenue and a conduit for development. Two key elements characterise this effort;

  1. The Government has passed an Act of Parliament that sets up the Ghana Integrated Aluminium Development Corporation (GIADEC) to oversee, participate, and ensure the integration of local businesses and skills in the aluminium industry.
  2. The Government has committed to receiving an upfront payment for part of the projected benefits from the value chain. Hence, it is implementing a $2 billion barter deal with Sinohydro Corporation, a Chinese state-owned company, for immediate infrastructure for future alumina or aluminium from the integrated aluminium industry.

The focus on the structure of the Chinese barter deal has shadowed other essential considerations. These considerations include a credible esmaon of bauxite reserves, the required production to reserve rao to offset the $2 billion barter deal, contextual challenges that may impede a successful IAI, and public engagement on the impact of extraction of the bauxite.

This paper seeks to analyse the various opportunities and challenges of the IAI programme. The analysis focuses on VALCO as a key player and assesses critical components that impact the company’s profitability. Also, the study examines various strategies available to the Government towards increasing bauxite production and constructing a bauxite refinery.

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