In the first segment of our investigation that can be read here, we observed that none of the bauxite-producing countries in Africa own both a bauxite refinery and a smelter plant. The different leading bauxite producing countries, either sell the raw bauxite, transform it into alumina and sell alumina, or have to import the alumina to smelt into aluminium.
There is a general problem of very limited production of alumina and aluminium, and the different African countries lose billions for not being able to process their bauxite. We went ahead to look at what could be the possible causes and discovered that the identified problems are not insurmountable. Read on:
Challenges Processing African Bauxite
Our investigation attempted to unearth the reasons behind the inability of these countries to have befitting refineries and smelters to process their bauxite. Issues bordering on governance, energy, and neo-colonialism were the dominant factors.
Governance
‘The strongest deterrent for foreign investors is the governance structures of most African countries which are fragile in the medium to long-term. Meanwhile, investments in bauxite processing are long-term in nature and so there is a need for some trust. At the moment, in most African countries, this reliability is absent. These facts are expressed in the Corruption Perception Index and Doing Business Reports in which most African countries occupy the lowest rankings,” said Isaac Awoh, a US-based Financial Specialist.
In 2017, Ghana entered into a US$2 billion batter arrangement with China, in which Beijing is to assist Ghana to solve its infrastructure challenges and then exploit Ghana’s bauxite worth the amount.
China is required to set up a bauxite refinery under the agreement dubbed the Sinohydro deal to be managed by the Ghana Integrated Aluminum Corporation (GIADEC). However, research conducted by the Natural Resource Governance Institute (NRGI) and the African Center for Energy Policy (ACEP) indicates that the materialization of such a deal could be far-fetched.
“In our yet-to-be-published research after an overview of the integrated bauxite development plan, including the Sinohydro deal, we observed that Ghana’s inability to do due diligence on the deal would create room for unnecessary delays which would result in Ghana exporting raw bauxite to repay the US$2 billion even before a refinery can be set up.
We realized that there was a focus on the structure of the deal leaving out other important issues like the interest of the nation. The whole transaction could be prolonged,” Nasir Alfa Mohammed, the Policy Advocacy Officer of the Natural Resource Governance Institute (NRGI) in Ghana explained.
Neo-Colonialism
An international legal mining consultant and Board Chair of a Guinean-based Mining Consultancy company, BFG Consulting and Services, Dr. David Makongo believes that Africa’s inability to adequately add value to its resources can be traced to neo-colonialism and the lack of political will of African leaders.
“Even though Africa has been granted independence, you still have colonial treaties that bind these countries with the former colonial masters such that the resources that leave these countries are either sold to their ex-colonial powers or their former colonial powers buy these resources at fixed rates already negotiated in disregard of the international process,” Dr. David Makongo stated.
“To invest in such a business needs a lot of money. How many banks in Africa belong to Africans? There are some deals banks will invest in because it is a national or continental project but not on all. Who funds the African Development Bank, ADB, the International Monetary Fund, IMF, and the World Bank? The big economies have directors who are sitting on the board of the bank! Are they going to approve a loan to build a plant? It is difficult,” Dr. Makongo argued.
Lee Bray corroborates such a thought from an economic standpoint. He argues that it is cheaper for China to buy unprocessed bauxite from Africa to feed its refineries in China than to build a refinery or smelter plant.
“Western countries don’t have much concern today about political risk like American and European companies had 20 years ago. Chinese companies have aluminum refineries and smelters in China that need a supply.
In 2014 Indonesia from where much bauxite was mined enacted an export ban on unprocessed minerals including bauxite. Chinese companies went to places like Guinea, Malaysia, and Australia. With refineries in China that are in need of bauxite, they would be reluctant to build a refinery or aluminium smelter in Guinea or Ghana,” Lee Bray argued.
Acute Energy Challenges
One of the major problems that almost split hair about value addition to bauxite is the question of power supply. According to Koney, the problem is not just the availability of power but the cost.
“The mining companies in the past years invested so much because of cheap power in the Akosombo dam. At the time the average power cost for the aluminum industry was 0.7 US cents in the USA. Meanwhile, companies were getting power in Ghana at a price of 0.2 US cents.
That was fixed for about 60 years. The interest of the mining company at that time was simply the availability of power. Now that it is expensive, it is not easy to find them investing,” Koney of Ghanian Chamber of Mines observed.
Dr. David Makongo however thinks if the investors were willing, they would be putting up the energy plants that would have helped run the mines.
“When it’s time to build the power plant to run the aluminum refineries or plants there is an excuse. This does not sound good to me. Part of the business is energy. If there is a will to build the aluminum plants here, they are still going to exploit the potential for the power plant to be built side by side with the aluminum plant.
Foreign companies want to make a profit from the energy on their own end. Business people may not want to build a plant because they know they buy the bauxite very cheap at US$30 a ton and sell the aluminum at US$ 2000 a ton,” he argued.
A Glimpse of Hope?
In light of these challenges, the governments of Guinea, Sierra Leone, and Ghana still remain optimistic about turning their fortunes on value-addition in the bauxite sector.
“Guinea revised its now very friendly mining Code in 2011 that protects investors. The only bauxite to alumina processing unit is in Guinea to date, one of the few in West Africa, if not the only one. At least 3 bauxite-to-alumina transformation units are planned for the next 3-4 years.
The foundations were also laid for some. There is hope that we will keep improving the mining sector,” Aboubacar Kourouma, Managing Director of the Bureau for Strategy and Development, BSD, at the Ministry of Mines and Geology in the Republic of Guinea, said.
Before 2022, the Republic of Guinea had had the provision of billions of dollars for its development partners for the construction of power plants in the country. It is expected that the Regime under President Mamadi Doumbouya which has begun some reforms in the mining sector would see the need to focus on resolving the energy question.
Sometime in June 2021, Sierra Leone launched after 90 years, a Geographical Survey of its Mineral sector. Sierra Leon’s Minister of Mines and Mineral Resources, Musa Timothy Kabba, boasted that now the country is aware of the size and depth of its resources, it would better manage them for the benefit of the population. For Ghana, the country is still pursuing its arrangement with China for an alumina refinery.
*This is the second and last part of an investigation about Africa’s bauxite. You can read the first part here. The cross-border investigation was conducted by Solomon Amabo and Marlvin James Dadzie.
