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Opinions of Saturday, 8 June 2002

Columnist: Acquaisie, Kojo Daniel-Brew

Ghana-VALCO Negotiations

WHO IS REPRESENTING LOCAL INDUSTRIALISTS AND THE DEVASTATED COMMUNITIES IN THE VOLTA PROJECT NEGOTIATIONS IN GHANA?


After over 30 years of combined operations in Ghana, the Volta Project[1] continues to dominate the industrial as well as private sector aspirations in the country. In a way it remains one of Africa's successful private-public partnership, however the negotiation leading to the Project appear not to have fully reflect the needs of local industrialists and as well as the livelihoods of the communities dependant on the Volta River and bauxite and this continues to rendered the partnership problematic in a number of ways which illustrates a fundamental flaw in public negotiations to recognise, address and accommodate the ownership questions of natural resources before embarking on extensive public negotiations with external entities.

In April 2002 Ghana re-entered negotiations on Volta Project after it has had two opportunities in the last 30 years to address the same subject and issues. The historical antecedents of the earlier flawed negotiations and the steps necessary to overcome them are examined in this essay.
 

A brief history of the Volta Project Negotiations:


The community around and the Volta River in Ghana once lived in peace and harmony with the river providing its nourishment and livelihood until one day 30 years ago all that changed.


The change occurred when electricity and aluminium demand in Europe and North America assumed a near fetish proportion with extensive searches all over the globe. The ensuring competition between emerging users of electricity and aluminum reinforced the scramble for and partitioning of Africa in the search of two main resources: electricity and bauxite.


Unknown to the community around the Volta River it had been earmarked for electricity after a British (Albert Kitson, 1924) surveyor in the Gold Coast Geological Survey published his work "The Possible Sources of Power for Industrial Purposes in the Gold Coast" which placed electricity and aluminium together after he also discovred bauxite at Mpraeso in the Eastern Region. The idea acquired prominence when a South Africa engineering expedition (Duncan Rose and C. St John Bird) picked up his publication. An expedition was dispatched to investigate and a company, West African Aluminium Limited (WAFAL) constituted to spearhead the search.


Ghana, then Gold Coast from that point onwards acquired a new image. Once a transit camp for slaves and source of gold, it was now a hostess of the two most desirable materials and resources in the world: electricity and bauxite.  The ferocity of World War II, which has been described as an aluminium war provided further impetus to the search for electricity and aluminium, when Britain decide to obtain its aluminium requirements from a sterling area. It was this decision that turned the limelight on the Volta River and the communities around it.


Until this point in history, the foreign coalition[2] considering electricity and bauxite in Ghana did not include the Ghanaian communities or their representatives. The incoming Ghanaian government (democratically elected representatives) inherited the idea of electricity and bauxite, which had by this time assumed international prominence. A Ghana Negotiating Team then emerged for the first time to consider how electricity and bauxite could best be galvanized for industrial development.


Evidence on the ground suggests that the Volta River and bauxite communities, which have had custody of the Volta River and bauxite, since the beginning of time, were not members of this Ghana coalition or Gold Coast National Committee as it was then called. It was assumed that once Ghanaians were in charge of political decisions then the interests of those communities were effectively being represented. This never happened.


Instead, the Ghanaian and foreign coalition together subordinated the natural rights of whole communities for an apparently collective Ghanaian good: providing electricity for all and building an industrial complex with bauxite as it nucleus. Thirty (30) years hence and Ghana's bauxite continues to be exported unrefined; the communities living around the Volta River have been devastated whilst the dream of abundant electricity for all remains a distant mirage.


The natural custodians of the Volta River have not only been infested with diseases but also their livelihoods have been shattered as to consign a whole generation of community to perpetual slavery, dependence and humiliation. Given that Ghanaians were part of the decision making and were actively involved in the negotiations with the foreign coalition, how did they condone the subjugation of sections of its own society whilst agreeing to a contract which fragmented the electricity and bauxite resources of the country and provided them virtually free of charge for use elsewhere.


This essay proposes that ethnicity combined with a failure of past Ghana governments in their own local negotiations to identify, recognize and empower the Ghanaian owners and custodians of the resources discovered within Ghana has been fundamental in contributing to end results that undermine their own communities whilst weakening their own bargaining power in subsequent negotiation processes with external parties.


The character and nature of the negotiations of the Volta River created an unhealthy precedent, which seems to have been continued to the present day. A Preparatory Commission (PC) was constituted by Ghana (Gold Coast) and foreign coalition (United Kingdom government and UK/Canada aluminium companies) on the 17 February 1953 and one Commander R.G.A. Jackson, an Australian, appointed as it Special Commissioner even before the issue of a PC were debated and approved by the Legislative Assembly.


After a rush debate by the Legislative Assembly in July 1953, the motion to establish a PC was carried but not without some stiff opposition since the Preparatory Commission (PC) did not have a Ghanaian membership. IN the ensuring debate it was proposed that the PC be enlarged to include two members nominated by the Legislative Assembly.


After the motion was passed, a subsequent report to the Assembly sought to alter the original decision and instead proposed a Ghana Negotiating Team which would monitor the PC.


The Gold Cost National Committee (GCNC) was established with seven members and a chairman as follows: President Nkrumah (Chairman), Mr. K. C. Tours (Minster of Finance), Mr. K. A. Gbedemah (Minster of Commerce and Industry) Dr. J. C. de Graft Johnson, Mr. W. E. A. Ofori-Atta, Mr. C.F. Amoo-Gottfried, Dr. E. E. Kurankyi Taylor and Mr. S. T. Flecku. The Team met in July and September of 1953 and then proceeded on a field trip to the UK and Canada to assess the aluminium smelter of the Aluminum Company of Canada (ALCAN). The mission's report was not available to the public or the Legislative Assembly.

Then in August 1954, the government revised the GCNC membership to eight to include the following: Mr. K. A. Gbedemah (Minister of Finance), Mr. K. Botsio (Minister of State), Mr. C. F. Amoo-Gottfried, Mr. S. T. Flecku, Mr. A. R. Otoo, Mr. Victor Owusu, Nana Ayerebi Acquah and Mr. Bukari Mahama. Two original members of the Team were dropped namely: Mr. William Ofori-Atta and Dr. J. C. de Graft Johnson. This revised Team also decided to visit the same facilities in the UK and Canada that had been visited by the earlier Team.
 

 

Even before the motion to commence negotiation had been passed by the Legislative Assembly in April 1952, one Mr. R. P. Armitage (Financial Secretary in the Gold Civil Service), Mr. E A. Hitchman (UK Ministry of Materials), Mr. Nathannael V. Davis (President of ALCAN) and a representative from the British Aluminium Company (BACO) met in London to discuss arrangements for the Volta Project.


There were subsequent consultations in May and June 1952 and the UK Government published a White paper (Cmd 8702) "The Volta River Aluminium Scheme", then the Ghana (Gold Coast) Government also published a paper " Development of the Volta River Basin" based on proposal submitted to it by a consulting engineering firm, Sir William Halcrow and Partners. The engineers were invited by the Ghana government to undertake a survey of the Volta basin but then they intern negotiated agreed with WAFAL under terms where WAFAL will make their findings available to them. It is clear that the fate of the communities living around the Volta River was determined elsewhere and not by there elected representatives.


The Preparatory Commission submitted its three-volume report on 31 December 1955 at a cost of 1,3 million Pounds Sterling. This included a payment of 256,000 Pounds Sterling to the West African Aluminium Company (WAFAL) set up by the two South African engineers who had earlier carried out a feasibility study of the Volta Project. It is inconceivable that the Ghana Negotiating Team could agree to a payment for a service by the WAFAL that was not contracted by them.


If the view of Dr. K. A. Busia, Dr. J. B Danquah and Mr. William Ofori-Atta had prevailed, the Legislative Assembly would have discussed the White Paper published by the UK government and Ghana would have had majority equity in the aluminium smelter component of the project. The trio was critical of the first field visit of the GCNC and made a series of arguments that suggested that the Volta project if designed under the terms envisaged would mortgage the economic future of the country.


This history is important to be examined for a number of reasons: (i) Ghana continues to negotiate after 30 years of initiating the Volta Project and livelihoods continue to be shattered and slum such as Ashiaman expand within the vicinity of VALCO (b) unemployment and poverty has increases in the bauxite producing areas of Ghana. (c) Instead of establishing a bauxite refinery, VALCO continues to import its alumina from Jamaica.


There is therefore a clear case that Ghana needs to go back to the drawing board on the whole Volta Project and review the evidence one more including for instance the Preparatory Commission's (PC) report which cost both the UK and Ghana governments 1,3 million Pounds Sterling in 1953. Against this background it is difficult to explain whether the Ghana Negotiating Team had adequate negotiation skills or they were under some sort of political pressure.


The Preparatory Commission envisaged that the Volta Project would cost 309 million Pounds Sterling This consisted of a 130 km railway to connect the bauxite mines at Yenahin ad the development of a bauxite refinery, smelter (210,000 tonnes annual capacity) and hydroelectricity electricity dam at Kpong. The PC report did not include the technical requirements of producing aluminium. It only considered the economic and human side of the project and no evidence that the communities living around the Volta were consulted.


By 1956, World aluminium prices have plummeted and the UK government did not find a large aluminium reserve useful and so their interest diminished and now wanted some of the financial support for the Project to come from the World Bank. The aluminium companies including ALCAN also started wavering ostensibly because of the political ideological posture of the government but more importantly they wanted more favorable electricity rate, which they proposed as US$ 0.001 per KWh of electricity contrary to the proposals of the Preparatory Commission.


This however offered the American government the opportunity to intervene. On the initiative of Mr. Gbedemah, the President Nkrumah met President Eisenhower of the United States. It was proposed that Henry J. Kaiser of California would do a re-assessment of the Preparatory commission Report with a view to cutting down the time frame envisaged for building the Project.


The re-assessment report was published in 1958. It recommended a dam at Akosombo, and an alumina plant and smelter at Tema, utilizing the bauxite reserves from Kibi. The cost estimated were: Phase 1 (Akosombo 4 generators plus transmission): 121 million Pounds Sterling. Phase 11 (Akosombo 6 generators):128.2 million Pounds Sterling, Phase III (Kpong): 187 million Pounds Sterling, Phase IV (Bui): 214.1 million Pounds Sterling.


These estimates were not very different from the proposals of the Preparatory Commission except that it cut down on the expenditure on public works expected to accompany the project. The report stated: There are ample reserves of acceptable quality of bauxite in Ghana, in relation to the proposed aluminium plant capacity and estimated electric power availability, it is suggested that the aluminium producer should examine the feasibility of building additional alumina capacity for sale and export.


Despite these definite statements about the acceptability of Ghanaian bauxite, the final unrecorded offer allowed alumina to be imported for the aluminium project, excluding Ghana's bauxite from the agreement. In November 1960, Mr. K. A. Gbedemah and Mr. E. Ayeh-Kumi signed the agreement of for the electricity rate to be charged to VALCO, which was set at US $ 0.002625 per KWh of electricity where as the going average rate in the United State for similar operation was US $0.007 per KWh of electricity. In comparison the Ghana Negotiating Team was very generous indeed in setting the rate, which was fixed for 30 years despite the fact that the concerned members of the Team visited European and North American aluminium facilities two times.


On 19 April 1961, the Volta River Development Bill establishing the Volta River Authority was debated under a certificate of urgency. The bill was passed within one hour. The debate on the Master Agreement between Ghana and VALCO took place on 20 January 1962 and signed by President Nkrumah for Ghana and Edgar Kaiser on behalf of VALCO[3]. In 1964 the construction of the smelter at Tema began. In 1965 the first commercial electric power became available from the Volta River Authority.


It is very clear from above, that the negotiation was narrowly crafted as to exclude not only the local representatives but also the communities living around the Volta River. There has not been a good explanation of why the bauxite refinery was excluded from the actual project construction. There was no prior extensive discussion of the any resettlement plan for the communities living around the Volta River.


It is also obvious that the negotiation was one sided, deliberately designed by the Ghanaians themselves to marginalize sections of their own society instead of empowering them. Individuals who originated from the bauxite areas in Ghana were dropped from the negotiating team. The Negotiating Team members were hand picked based on political expediency instead of technical, social and economic considerations. The negotiators did not have much knowledge of the technology being negotiated and most importantly there were no local engineers with knowledge of electricity generation and aluminium smelting on the negotiating team. It was therefore surprising that the leaders at the time thought it necessary to rush the issue instead of careful internal preparations.


Negotiation skills versus Political Expediency:

A review of the former Ghana Negotiating Team, Gold Coast National Committee (GCNC) will also show that ethnic/tribal balance was optimized instead of directly engaging with the communities and the representatives of the communities that were going to be affected by either the damming of the Volta River of the mining of bauxite. One could propose a rationale for the government's inaction to the deliberate elimination of the bauxite component of the Volta Project.


Dr. J. B. Danquah, an intellectual from the Okyeman area, which incidentally is in the bauxite mining zone had been a constructive objector to aspects of the Volta Project and for that and other things was in prison and in some way had aroused the hostilities of the Akims to the government. A major investment proposition, which sought to empower that area financially and economically, was probably thought unwise. The elimination of the bauxite component of the agreement even though it had been fully negotiated did not draw any strong reaction from the government.

The recent appeal by the Okyeman Council to President Kufour in July 2001 to find investors to exploit the huge bauxite deposits in the area to create employment is indeed revealing and supports aspects of the political history and claim made above.

The assertion by the Okyenhene, Osagyefo Amoatia Ofori Panin, in July 2001 that "the Okyeman is replete with atrocities and humiliation at the hands of past governments because of the perceived notion that Akyems always opposed the government of the day" provides strongest evidence yet to the claim about past Ghana government's attitude to political and economic activities including bauxite mining in the Okyeman area.

This inherent attitude has been exploited by the Volta aluminium Company (VALCO) to it commercial advantage for the last 30 years by providing lip service to the idea of establishing bauxite whilst it continues to import processed bauxite (alumina) from Jamaica and thereby contributing to the poverty and impoverishment of the bauxite mining communities.

It would have been appropriate for the Ghana Negotiating Team to have first recognized the authority and empowered the communities directly affected by the Volta River ad bauxite mining ventures before any negotiation with a foreign coalition who were ready and very prepared for the negotiation.

The former Ghana Negotiating Team did not really address the fundamental purpose of the Volta Project. It is apparent from the way the negotiation was conducted that very little recognition was given to the social and economic relevance of the Volta Project to Ghanaians. This negative precedence was repeated in 1982 when another Ghana Negotiating Team ignored the fundamental inconsistencies as elaborated above in the whole Volta Project and instead settled for a token electricity price increase. The key issue is the acquisition of majority equity in VALCO as well as its cessation of alumina imports, which is of critical social and economic importance to the country. 


Alternative Negotiation strategies:

This review is timely in a couple of ways. The first is that Ghana commenced another major renegotiation in April 2002 with the establishment of a Ghana Negotiating Team lead by Mr. da Rocha on the same subject and issues examined by a previous Ghana Negotiating Team about 30 years ago. The second rationale is that Ghanaians had the opportunity in 1982 under a military dictatorship to renegotiate the term of the Master Agreement by Ghana Negotiating Team led by Professor Akilagpa Sawyerr (former Vice-chancellor of the University of Ghana) on the same subject and issues without much change in the situation of the communities devastated by electricity and aluminium project nor was the dream of establishing an integrated aluminium industry with Ghana's bauxite as it nucleus realized. 
 

 

This raises a number of questions: (i) what has been done to ensure that the current Ghana Negotiating Team is representing the views of local industrialist, the communities producing bauxite and all sections of Ghanaian society? (ii) To what extent is the Ghana public fully engaged on the complexity of the issues being addressed? (iii) In the absence of any recent published social and economic research, how has the Ghana Negotiating Team directly reflected the needs of the communities that were devastated by the creation of the Volta River Authority (VRA) and Volta Aluminium Company (VALCO)?

in addition to addressing the problems of the endangered communities around the Volta River, it is vital that the present negotiation also considers the underlying rationale for harnessing large quantities of electricity when the country continous to export raw bauxite to be refined elsewhere.

VALCO continues business as usual by continuing to consume nearly 58% of the electricity generated and exporting 90% of the aluminium it produces to be used elsewhere. It continues to import refined bauxite (alumina) and all its materials and supplies. It maintains very minimal contact with local industrialist whilst slums such as Ashiaman, which was non-existent before VALCO was established, continue to expand and attract those whose livelihoods have been devastated by the deliberate strategies commercial of VRA and VALCO.

What is even more intriguing is that the Volta River Authority (VRA) that is supposed to be a public organisation operated and managed by Ghanaians has become technological dependant and has created an enclave and a township in Akosombo, which will make any supporter of apartheid very comfortable in that enclave. The procurement strategies of VRA and VALCO are very much similar with both organisations completely excluding any form local sub contracting and joint ventures with local industrialist.

By the decisions that were agreed by a previous Ghanaian government 30 years ago the country has inextricably been tied to the World Aluminium Industry with the country playing second fiddle to the rest of the global aluminium fraternity. It exports its bauxite to be refined elsewhere and supplies abundant and virtually free electricity for use by others in producing aluminium, 90% of which is exported. For how long is Ghana going to play this second fiddle position whilst it communities are placed on death row and hopelessness? Twenty (20) years of economic recovery and structural adjustment has not changed the business as usual attitude of both VRA and VALCO. 
 

 

The present negotiation is pointless if the issue is only to request electricity fees from VALCO. It is clear that the beneficiary of such raise is VRA, which as a monopoly has remained static and technologically dormant for the last 35 years.

If VRA was dynamic, it would have by now be earning alternative incomes from electrical engineering services and competing with its cohorts for business globally. It should have diversified it skills such that it could construct different options for generating electricity. VRA is infact an engineering disgrace. 


In view of the weaknesses of earlier monolithic Ghana-VALCO negotiation Teams, it is proposed that this third attempt by the Ghana Negotiating Team should be strengthened by dividing it into three groups with specific terms of reference as follows:

Ghana Negotiating Team A-Terms of Reference:

Team A should undertake a comprehensive research of the social and economic status of the people displaced by the Volta River and as well as the potential lost revenues for 30 years of the bauxite producing areas. 

An established community leader with significant knowledge of the subject and issues affecting the bauxite producing area could be considered to lead this Team. 


Ghana Negotiating Team B-Terms of Reference:

Team B commences negotiation with Volta River Authority (VRA) on how it could find alternative sources of revenues and also the steps for fast tracking its privatization. Team B should consider stripping VRA of its monopoly structure and propose its division into three electricity generation companies, with an exclusive focus on electricity generation only. Their procurement strategies should be reviewed to ensure extensive local private sector participation.

Team B should provide further information on how of the original loans provided for the Volta Project are still outstanding and draw up a contingency plan for paying of the liability. 


Team B should also consider the extent to which transmission of electricity could be organized under a single company such as Akosombo Transmission Company that will solely be responsible for all issues and business of transmission. For instance the distribution of electricity should be regionalised, with each region of Ghana hosting a Regional Electricity Company. Team b could consider proposal for abolishing the Electricity Corporation of Ghana immediately all its assets transferred to the Regional Electricity Companies. A prominent local engineer and an economist with excellent negotiating skills could be considered to lead this Team.

Ghana Negotiation Team C-Terms of Reference:

Team C should focus on VALCO. It should demand 50% of the aluminium produced over a five years period. Its procurement strategies should be reviewed and all supplies capable of being obtained in Ghana should be out sourced from Ghana. The procurement of its other supplied should be submitted for both local and international tender, with preference for local industrialist. 

VALCO should be required to pay the appropriate company tax paid as current paid by all local companies. All subsidies and special preferences should be removed. All these terms to be reviewed after every five years. Team C should consider linking electricity prices to the average price charged to aluminium smelting companies in the United States which a percentage surcharge proportion to the dollar value of imported supplies, such it the surcharge diminishes as it find local substitutes for all its operations. Team C should propose a timetable for consideration by the government acquiring 60% of the equity of VALCO. A prominent local industrialist with significant interest and experience of the Ghana aluminium industry should be considered to lead this Team.

The Author:
Kojo Daniel Acquaisiehas researched extensively on the World Electricity and Aluminium Industry with special emphasis on Volta River Authority (VRA) and Volta Aluminium Company (VALCO) in Ghana. Between 1993-95 he participated in a number of World Electricity and Aluminium Conferences including the World Electricity Conference held in London. He has also had extensive collaboration with a number ofaluminium smelter operations in Africa, Europe and North America. He is a member of the Institution of Mining and Metallurgy based in the United Kingdom. His current activities include providing advisory support to international organisations and African regional economic organisations in strengthen their capacities and strategies for conflict prevention and post-conflict recovery. He can be reached on: Acquaisie@aol.com or Acquaisie@hotmail.com.




[1] This is made up of the Akosombo hydro-electricity dam managed by the Volta River authority (VRA) and the Tema aluminium smelter managed by the Volta Aluminium Company Limited

[2] This was made of the United Kingdom Government, British Aluminium Company, and the Aluminium Company of Canada (ALCAN) and the West African Aluminium Limited (South African). When the United States joined the coalition it now consisted of: Kaiser aluminium and chemical Corporation, ALCAN, Olin Mathieson and Reynolds Metals and the Aluminium Company of America (ALCOA). By 1961, Olin Mathieson, ALCOA and ALCAN dropped out leaving Kaiser with 90% equity and Reynolds with 10% equity in VALCO, which was formed in 1959. 

[3] Under the terms of the Master Agreement: (a) VALCO will not pay import duty on alumina or other materials to be used in the construction or operation of the VALCO until 25 April 1980 (b) No restriction or taxation of VALCO's aluminium exports (c) VALCO will pay company tax until 25 October 1978. From that date, until 1997, tax will be levied at the rate in force on 2 January 1961 (d) VALCO's dividends to be free of tax until 25 April 1980 (e0 VRA is to be obliged to serve increasing electricity demand from VALCO. 





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