Ghana to reject Valco

The sad saga of Ghana's Valco

Forty years ago, US aluminium companies not only dictated their own terms for the power required to drive their voracious smelters, but also the politics of entire South-based nations. (Some critics would claim they still do so today - if to a lesser extent).

The decision by Edgar Kaiser's eponymous aluminium company, along with Reynolds Aluminium, in 1960, to set up an aluminium enterprise in Ghana was based primarily on securing cheap electricity from the Volta River. Access to Ghana's rich bauxite deposits - though important - came second. The companies were assisted by the World Bank and the fact that Kwame Nkrumah's government had committed itself to debt repayments it could ill afford.

For twenty years the Volta partners got the cheapest electricity on the planet, while Ghana was forced to import oil at the expense of no less than half its vital foreign exchange.

In 1966 Nkrumah was overthrown in a CIA-engineered coup: caught between negotiating for a better deal with Kaiser, while moving the country towards socialism and into the arms of Russian communism. The ousted president initially called Valco "the greatest of all our development projects". Yet, from the outset, the power to govern it - both literally and figuratively - had been surrendered

Now, with the company's operations crippled and the Ghanaian government shrinking from the prospect of taking them over. it seems likely Valco will simply be asset-stripped

Ghana to reject Valco

Homepage Ghana

1 March, 2004

With barely a month ago before the committee of energy experts submits its recommendations on Volta Aluminium Company (VALCO), top government say it is unlikely that government will go ahead to buy the beleaguered company.

Even though the committee is yet to make official statements, sources close to the committee have hinted that the government would be asked to consider providing guarantee for private sector-led private acquisition.

Furthermore, members of the special committee of energy and aluminium experts set up by the Energy Minister Paa Kwesi Nduom, have reached a critical stage of their work and they are not going to give a blind fold.

By the end of the next month, the committee is expected to issue its findings, advising government whether to buy VALCO or not and also to recommend to government the mode of purchase.

Among other issues being considered are VALCO's balance sheet and how strategic VALCO, is to the economy of aluminium industry in the country and within the sub region. Other worrying aspects of the purchase that the committee is concerned about is the conflict in government's policy of non-direct involvement in the operations of corporate bodies in favour of the private sector.

But apart from the administrative impropriety, questions that tilt the cards against government's bid for VALCO directly include the question of how to finance the purchase, an issue that has taken center stage of the committee's work.

In December, government decided to consider an offer to buy VALCO after an unannounced visit by a top official of Kaiser from the United States to the country.

However, government's intention to buy VALCO was met with harsh criticism and condemnation from various corporate bodies, who felt government should allow the private sector to determine the fate of VALCO.

The public was unhappy that government was should intend to buy the ran down smelter which had all its five pot lines shut for refusing to pay the right tariff for electricity.

The operations of the company had witnessed a downturn in the past decade forcing it to reduce its production capacity from over 200,000 tons per annum by more than 80 per cent.

Kaiser gave government until March to make an offer or express interest, but initially offered VALCO at between 30million dollars to 80 million dollars with a flexible payment system.

If government does not buy VALCO, Kaiser will opt for the next step of its strategy that is to bag and baggage and probably sell its assets to individual investors under a concession package.

This decision will result in the total collapse of the 50-year old smelter and users of VALCO products will rely totally on imports