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Sat, Dec

SINOHYDRO DEAL INNOVATIVE- BAWUMIA

Business & Economy

Vice-President Mahamudu Bawumia says the decision by the Akufo-Addo government to enter into a $2 billion bauxite-for-infrastructure barter arrangement with Sinohydro Corporation of China is an example of innovative, out-of-the-box thinking.

Vice-President Mahamudu Bawumia says the decision by the Akufo-Addo government to enter into a $2 billion bauxite-for-infrastructure barter arrangement with Sinohydro Corporation of China is an example of innovative, out-of-the-box thinking.

 

The arrangement seeks to leverage a fraction of Ghana’s bauxite resources to address national infrastructure challenges, and will make possible a broad range of projects, including hospitals, bridges, roads, affordable housing and rural electrification, in line with the NPP government’s development agenda.

                                                                                                     Joint venture

Speaking at the 2018 Ghana Economic Forum in Accra yesterday, the Vice-President explained that Sinohydro’s mandate is to construct infrastructure, not engage in mining, and he dismissed suggestions that the Akufo-Addo-led government had “sold Ghana’s bauxite to China for $2bn”.


Rather, the government has set up a holding company which will soon enter into a joint-venture agreement with mining companies, refineries and off-takers from across the world which have the capacity to establish the bauxite operations. Proceeds from Ghana’s share of the refined bauxite will be used to pay for the related and other infrastructure.


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


“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,” he said.

                                                                                                   Ghana chooses

The Vice-President observed that the government had set up a holding company called the Ghana Integrated Bauxite and Aluminium Development Authority, backed by an act of Parliament. This will soon enter the joint venture to establish the bauxite mines and refinery.


After mining and refining the bauxite, the government will use Ghana’s share of the commodity proceeds to pay off the costs of infrastructure provided by Sinohydro.

“This will only happen after a period of three years,” Dr Bawumia said, “and on condition that Sinohydro has completed the infrastructure projects that the people of Ghana have asked them to do.


“So Sinohydro will be providing the infrastructure, but Ghana will choose its own partner to set up the integrated aluminium development industry. The partners could come from America, Australia, Canada, China, wherever. Once we are confident of the capacity of the potential partners, we can enter into partnership with them.”


Alluding to the misinformation campaign being waged against the arrangement, Vice-President Bawumia said checks and balances have been put in place to ensure that Ghana is not shortchanged.


“Like all multiyear financial arrangements, there are risks,” he conceded. Ghana’s technical team has been working out the details and running sensitivity analysis “to determine our degree of vulnerabilities and the terms most beneficial for Ghana”, he said.

                                                                                                 Capital needs a home

Recent developments in the banking sector and financial services also figured large in other discussions at the Forum.


In a panel on the importance of a “world-class financial sector” in creating a competitive economy, Kojo Addae-Mensah, group chief executive officer of Databank, urged financial-sector regulators to engage investors seeking to offer new products that will help the Ghanaian market become more competitive.


Addae-Mensah said there was abundant capital on the international market and that investors are still looking for locations to place it. The capital market in Africa, however, is very narrow and Ghana, being a relatively small economy, has to devise measures to ensure that it does not drive away investment.


He said many potential investors are not interested in the small-ticket deals that Ghana generally offers, and that others offer products for which the Ghanaian market seems unready. This often leads regulators to push away such investors when they should rather engage them, the Databank CEO said.

                                                                                                       Governance

Speaking on the sidelines of the forum, Nana Otuo Acheampong, an Accra-based consultant, told the Daily Statesman that the failures of seven Ghanaian banks in the past year could be attributed to many peculiar factors, but poor credit analysis and governance were largely to blame.


“The corporate governance structures of the collapsed banks were generally weak,” Acheampong said. “Some owners treated the banks’ deposits as if they were their own and so they could do what they want. Yet most studies have found that in the banking sector, on average, 13 per cent of assets are owned by the bank and the remaining 87 per cent is other people’s money.”


The failed banks collapsed because they could not live up to the simple requirement to balance their assets against their liabilities, he told the Statesman. However, he noted that some parts of the banking industry continue to offer examples of best practice.


“Some of the well-run Ghanaian institutions have first-rate governance,” he said. “CAL Bank’s corporate structures are on a par with those of the best high-street banks in Europe.”


He urged account-holders to maintain their trust in those institutions that are properly governed but push for close supervision of other players in the sector.

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