The Volta River Project in Ghana, West Africa

By: Watkins, Thayer

The Volta River Project in Ghana, West Africa

One of the earliest European explorers of West Africa, Mungo Park, suggested that the lower reaches of the Volta River in what is now Ghana would be an excellent site for a dam and accompanying

Volta River Gorge south of Ajena water development project.

Although the Colonial Administration of the Gold Coast in 1924 started considering a water development project for the Volta the project did not reach a serious stage until Kwame Nkrumah became the leader of Ghana after independence. The financial feasibility study for the project indicated that the project would effectively just break even. International lenders, such as the World Bank, were not enthusiastic about lending funds for the project.

A similiar result had come out of the economic analysis for the Aswan High Dam in Egypt. Despite the conclusion that the the Aswan High Dam project would not produce significant net benefits President Nasser of Egypt wanted the project undertaken. Since Western sources were not in favor of funding the project he turned to the Soviet Union, then under the leadership of Nikita Khrushchev. Khushchev was unconcerned about whether the Aswan High Dam would produce net benefits. He was interested in funding it only because of the influence it would give to the Soviet Union in Egypt and the rest of the Arab world.

After seeing the international political consequences of not funding a major development project in Egypt Western leaders were more sympathetic when Nkrumah asked to help getting the Volta River Project funded. One of the problems for the Volta River Project is that it needed a purchaser for the excess electrical power output. Aluminum is a heavier user of electricity and an aluminum smelter would make a good adjunct to the project. The problem was that at that time the aluminum industry already had adequate capacity, even over-capacity, and there were no companies interested in entering into a long term contract to purchase electricity from the Volta River Project.

Nkrumah prevailed upon President Dwight Eisenhower to use his personal influence to persuade Henry Kaiser to put together a consortium of aluminum companies to build an aluminum smelter in Ghana. Kaiser and the consortium were willing to build the aluminum smelter only if the price of electricity was extremely low. Later that low price was criticized as exploitative but it had to be that low to induce the aluminum producers to build the smelter in the first place.

There is an interesting anecdote concerned with how the Volta River Project was resurrected. Komla Gbedemah, the Minister of Finance and a top leader of Ghana second only to Nkrumah, was traveling in the U.S. in 1957. He and his secretary, an African American, stopped for breakfast at a roadside restaurant in Delaware and ordered orange juice. The waitress said she could not serve him because he was black. Gbedemah asked to see the manager who told him the same thing. Gbedemah then told the manager,

"The people here are of a lower social status than I am but they can drink here and we can't. You can keep the orange juice and the change, but this is not the last you have heard of this.

The next day the incident was headline news around the world. President Eisenhower invited him for breakfast the next day. Eisenhower asked Gbedemah what he was visiting in America for and Gbedemah told him it was to try to find funding for the Volta River Dam. Eisenhower asked Vice President Richard Nixon to help arrange financing.

The World Bank carried out an analysis of the Volta River Project. The World Bank study is the source of the statistics below. The figures are in thousands of Ghanian pounds (G£), which at the time had an exchange rate of 1 G£ = $2.80. Initially Nkrumah intended to develop the sources of bauxite, the ore for aluminum production, at Yenahin in Ashanti Province in Ghana to supply the aluminum smelter. This proved to be too expensive and the project was modified to eliminate this subproject. The original plan was for the dam to be at Ajena but it was found that another site, at Akosombo, involved significantly lower costs. Another project, a port at Tema and a connecting rail line to it, was separated from the project.

The project as it ultimately was funded involved an initial installation of 589 megawatts of generating capacity with 294 additional megawatts of capacity to be installed during the third and fourth year of the project bringing the total generating capacity to 883 megawatts. A preliminary analysis of the project showed that a cost of capital of 7 percent the project would just about break even, the net prestent value over a 57 year period being a negative 475 thousand Ghanian pounds.