Parliament Approves Barter Facility of $2 Billion To Finance Gov't Priority Projects

Parliament has adopted the report of the Finance Committee on the Master Project Support Agreement (MPSA) between the Government of Ghana and Sinohydro Corporation Limited for an amount up to two Billion United States Dollars (US$2.00Billion) for the construction of priority infrastructure projects.

The objectives of the project 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.

The priority projects of the government of Ghana to be funded under the MPSA comprise: rural electrification, construction of hospitals and clinics, bridges, interchanges, roads, affordable housing, fishing landing sites and such other projects as may be identified by the government of Ghana.
 
Presenting the Committee’s report, the chairman of the Committee, Dr. Mark Assibey Yeboah stated that, “under the MPSA, Sinohydro is responsible for arranging the project financing for all the priority projects subject to the mutual agreement of the parties.

“Sinohydro shall be solely responsible to enter into the financing agreement(s) with any financial institution that agrees to provide the Project Financing”.

He said the Committee was further informed that the MPSA is essentially a “barter” facility by which Sinohydro will implement various EPC contracts for Ghana and the government repays with relined bauxite (alumina/aluminum).
 
Dr. Assibey Yeboah further said “to enhance and maximise the value to Ghana of its bauxite resources, the Committee was informed that 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 the obligations under the MPSA”.
 
According to him, this is expected to help create jobs and enhance the value of the resource to Ghana, stressing that, “presently raw bauxite was said to trade at about US$24/tonne on the international market whilst processed alumina trades at more than US$300/tonne”.
 
The Deputy Minister for Finance, Charles Adu Boahen reported to have informed the Committee that the “Agreement is only a batter arrangement and not a loan. He explained that refined bauxite (alumina or aluminium) would be used for the barter agreement and it will not add to the public debt”.
But in a sharp contradiction, the Minority insisting that, it’s a loan agreement and not barter facility as advanced by the Majority, Minority Leader, Haruna Iddrisu and his colleagues pointed out.

Meanwhile, the Committee observed from Clause 2.3 of the MPSA that repayment obligations of Government of Ghana to Sinohydro for Sinohydro Arranged Project Financing shall be deferred and honoured over a total term of fifteen (15) years (inclusive of a 3 year grace period), but the commencement of payment term shall be deferred to the date on which Sinohydro confirms to GoG that it has secured the commitment for the relevant project financing.

Government of Ghana is to make the repayments out of receipts from transfer of refined bauxite (alumina or aluminium) to Sinohydro's strategic partner (Offtaker). Where such receipts are insufficient to service the Project Financing, GoG will be required to use other sources for the repayment to Sinohydro.

The Parties are to negotiate and enter into EPC Contracts based on FlDlC EPC Contract Conditions for Phase I of the Projects within three (3) months from the execution of the MPSA. Within six (6) months thereafter, the Parties will negotiate and enter into EPC Contracts for Phase II.
 
The background
The Government of Ghana recognizes the importance of good mad infrastructure as a critical facilitator for rapid socio-economic development of the country through the improvement of accesses, reduction in travel times, congestion, vehicle operating cost, accidents and cost of doing business.
 
To ensure the operational efficiency of road transport in moving persons, goods and services within the country and with neighboring countries, the Government has implemented some major road infrastructure projects and continues to source funding to implement additional critical infrastructure projects nationwide.

Story By: Edzorna Francis Mensah
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