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Business News of Wednesday, 1 August 2018

Source: thebftonline.com

US$2billion Sinohydro deal to kick start before end of year

The first phase of the Ghana Sinohydro US$2billion infrastructure deal, comprising the release of US$500m to undertake infrastructural projects in roads, bridges, hospitals across the country is expected to commence before the end of the year, Deputy Information Minister, Kojo Oppong-Nkrumah has said.

“The phase one which is US$500m has been approved by Cabinet and Parliament has also approved the US$2billion master support agreement. The next steps are that the phase one project which has been approved by Cabinet will quickly get Parliamentary approval and then construction will commence hopefully before the end of this year” he said.

Addressing a press conference in Accra on the Ghana Sinohydro US$2billion infrastructure deal, the Deputy Information Minister, maintained that the deal is a barter arrangement which opens up a new financing model for the country to undertake infrastructure in exchange for refined bauxite.

He indicated that the barter payment period will commence after an initial three year grace period because they are expecting a good chunk of the work and payment structure to be put in place within the first three years.

Deputy Minister for Roads and Highways, Anthony Karbo, also indicated that most of the roads chosen have a national spread and were carefully chosen to have an impact on agriculture, service delivery.

“In phase one many of the projects are urban related, they are in the urban centres and are spread across the ten regions of Ghana and many are highways and urban roads, but in the second phase which the Ministry is currently working on, you will see many road infrastructures in the rural areas of Ghana, so that will have a lot more rural roads.”



Furthermore, he added that this is a new way of financing that government has entered into, insisting that other African countries have gone similar routes and have benefited from it.

The barter payment shall be made with refined bauxite or aluminium by the government agency, Ghana Integrated Bauxite Development Authority.

In terms of payment, Ghana will only pay on the portions of the funds equivalent to work that has been done.

The country will be offering 2billion worth of refined bauxite alumina and will only pay based on the portion of work that has been done.

The bauxite will be refined by the Ghana Integrated Bauxite and Aluminium Development Authority (GIBADA)

The said facility would be in exchange for alumina processed from Bauxite deposits in the country as announced by Finance Minister, Ken Ofori Atta in the mid-year Budget Review

Parliament has passed the master project support agreement for a 2 billion dollar facility for the construction of priority projects by Chinese firm SynoHydro Corporation.



Parliament’s approval

An international agreement that will see Ghana and China trade in bauxite in exchange for cash worth US$2billion has received the approval of the Parliament of the West African nation amidst concerns from some Members from the Minority Caucus.

This follows the adoption and approval of the report of the Finance Committee on the Master Project Support Agreement (MPSA) between the Government of the Republic of Ghana and Sinohydro Corporation Limited for an amount up to US$2billion for the construction of priority infrastructure projects.

The deal which is in the form of barter will enable the former British Colony raise US$2billion from China’s Sinohydro Corporation Limited to undertake various infrastructure projects that are aimed at bridging the country’s infrastructure deficit estimated at US$30billion.

Sinohydro Corporation Limited would, in turn, receive refined bauxite in the form of alumina or aluminium over a fifteen-year (15-year) period (inclusive of a three-year grace period) from the Republic of Ghana.

Per the deal, thus the Master Project Support Agreement, the Government through the Ghana Integrated Bauxite and Alumina Development Authority (GIBADA) will establish a bauxite processing plant to process the raw bauxite into alumina before shipping same to service its obligations to Sinohydro Corporation Limited’s strategic partner (Offtaker).



Deferred Repayment

The Chairman of the Finance Committee, Dr. Mark Assibey-Yeboah, presenting the committee’s report to the plenary told Members that under the MPSA, the Chinese state-owned hydropower engineering and construction firm is responsible for arranging the project financing for all the priority projects subject to the mutual agreement of the parties.

Sinohydro, he added, “shall be solely responsible to enter into the financing agreement with any financial institution that agrees to provide the project financing.



Objectives

The objectives of the project, according to Dr. Assibey-Yeboah are to improve road infrastructure for enhanced intra-urban, regional and national road traffic flow, pursue rural electrification, affordable housing, fish landing sites, strengthen economic and regional integration and reduce the cost of doing business in the country.

Minority’s concern

Despite the deal coming in the form of a barter, the Minority National Democratic Congress (NDC) MPs contend that the cost involve will still add up to the country’s public debt stock which stood at US?142.3billion as at the end of 2017.

They were particularly, opposed to what they described as attempts by the Ministry of Finance to ‘hide the debt’ involved in the agreement.



Spokesperson for the Minority on Finance, Casiel Ato Forson, argued that describing the arrangement as barter would obscure what is in their opinion a debt that the Government is incurring under the agreement.

He indicated that his side will surely go to court over the barter trade agreement.