New details have emerged in the US$2 billion deal between Ghana and China’s Sinohydro Corp., including a provision that will mandate the west African nation make up any difference between the bauxite revenue gleaned from the deal by Sinohydro and the monies spent on Ghanaian infrastructure.
The deal, which was formalized in May, contemplates Sinohydro building housing, hospitals, roads, bridges, and other critical infrastructure. In return, President Nana Akufo-Addo’s government will repay Sinohydro with proceeds derived from refined bauxite produced at a plant to be completed three years from now.
Per the agreement, construction on Ghana’s infrastructure will commence immediately, but payments will not begin for another three years. Those payments will be made in equal installments over the course of the next dozen years according to a copy of the agreement obtained by Bloomberg.
However, should proceeds from the bauxite plant fail to cover the US$2 billion in infrastructure, the Ghanaian government will be obliged to use “other sources” to make up the difference.
Sitting atop the biggest known bauxite reserves on the planet, Ghana hopes to leverage their potentially vast mineral wealth to help them pay down debt and boost their economic well being. The country is in the final year of a US$1 billion bailout by the International Monetary Fund, and the country’s public liabilities equaled 63.8 percent of gross domestic product as of this spring.
“We don’t want to put $2 billion on Ghana’s books to increase our debt,” said Ghana’s finance committee chair Mark Assibey-Yeboah to Bloomberg. “So it is Sinohydro that is contracting the entire $2 billion loan.”
Assibey-Yeboah continued by revealing that his government has begun soliciting proposals for the construction of the US$300 million bauxite plant, while Ghana’s parliament will take up the debate over the Sinohydro agreement by month’s end.
Beijing has made it a point to court African governments in recent years, but critics have charged the Chinese government with a disconcerting preference for loans over other financial relationships.
“Ghana has been a firm friend of China,” expressed Akufo-Addo in a statement shortly after meeting with Chinese President Xi Jinping recently. “Chinese cooperation and investment in our economy are extremely essential.”