Say It Loud


Lucky Luciano
2018-09-12 15:36:58

IMANI, stop muddying the water and call a spade a spade. From your own analysis of the Ghana-Sinohydro deal before Parliament, this is the tentative conclusions you have drawn:


The second point to note is that a tentative “financing agreement” was annexed to the MPSA complete with a far-ranging disclaimer. This “term sheet”, as the drafters refer to it, merely provides the broad contours of the commercial terms of the facility. A cursory read through establishes a very simple point: NONE OF THE AGREEMENTS CURRENTLY BEFORE PARLIAMENT CONSTITUTES A LOAN AGREEMENT. The appeal to the IMF by the minority in Parliament, whilst understandable given the importance for clarity, may well turn out to justify our position. Unless as we explain that given the complexity of the deal, the government may have unknown to the country actually entered a loan agreement to actualize the deal. That would be shocking.

What is also true from an assessment of the “term sheet” is that the Government of Ghana and Sinohydro DO INTEND TO ENTER INTO A LOAN AGREEMENT. To the extent that Sinohydro hasn’t yet committed to the actual financing in the MPSA, the agreement before parliament cannot be construed as a LOAN agreement. However, Ghana must enter a loan agreement to keep this deal alive.


What is there to doubt as to whether this whole deal will in reality require a loan financing agreement? The long and short of it all is this.

1) The government wants money for infrastructure projects. It does not have it. Not only does it not have the money, but is also conscious of the fact that Ghana is already a highly-indebted nation. Therefore, simply going to the IMF, WB or other international financial institutions to borrow money will not be an easy sell, or will come at great cost.

2) It agrees with China to do what appears to be a barter deal. Chna will be entitled to $2 billion worth of Ghana's bauxite. In return, China, working through a Chinese company, Sinohydro, will implement infrastructure development projects in Ghana, equal in value to the $2 billion worth of bauxite China will mine from Ghana.

3) Ghana and Sinohydro will make a financing arrangement with a bank, which will to all intents and purposes finance the infrastructural projects that Sinohydro will be engaged in to complete in Ghana.

Now, whether the government wishes to call it a loan or barter agreement, it will without doubt add to the countries stock of debt. This fact cannot be hidden by the use of the term - BARTER.

The financing arrangements aside, this is what we should really be looking at and analysing.

As at the year 2009, Ghana's annual bauxite output was 440,000 metric tons. I am yet to find a link to give the current annual output, but let me use 500,000 tons for the discussion.

The current world price of bauxite is $28 per ton. This means, Ghana would earn only about $14 million from it annual bauxite output of 500k mts.

Is the payment through bauxite exchange under the Ghana/China barter agreement going to come from our current bauxite production, or will the Chinese be given new bauxite concessions to mine. I will assume it is the latter.

If it turns out to be the latter case, we do not even know how much bauxite will be produced from the new concessions annually. But note something. If Ghana's annual income from bauxite is presently $14 million assuming 500k mts production, this means Ghana will need about 140 years of bauxite production annually in order to repay China the $2 billion - that is ($2 billion divided by $14 million).

The Chinese are going to be in Ghana forever.

But here is the interesting bit, which will be lost on most people analysing this deal. While Ghana's annual bauxite production is just about 0.5 million tons, that of China is 68 million metric tons or 136 times what Ghana produces.

Yet they are coming for our tiny production. Ask yourself WHY?????

As I indicated above, the world price of raw bauxite is $28/ton. After it is refined and processed into aluminium, the price goes up to $2,100/ton.

See the difference???

Ghana will sell bauxite to China at $28/ton and buy aluminium from China at $2,100/ton to feed VALCO.

Ohh, least I forget. Whether the bauxite mining deal with China is successful or not, Ghana must still find money to pay Sinohydro.

Is that why we are now searching form a $50 billion century loan???
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Lucky Luciano on 09-12 15:36