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 addion process to Ghana’s bauxite began with construcng 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 aempts to create a bauxite refinery has created the situaon where refined bauxite (alumina) is imported to operate the smelter.

In 2017, the Government of Ghana announced its renewed effort towards creang 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 Corporaon (GIADEC) to oversee, parcipate, and ensure the integraon of local businesses and skills in the aluminium industry.
  2. The Government has commied to receiving an upfront payment for part of the projected benefits from the value chain. Hence, it is implemenng a $2 billion barter deal with Sinohydro Corporaon, 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 essenal consideraons. These consideraons include a credible esmaon of bauxite reserves, the required producon 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 extracon of the bauxite.

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