Fitch warns political risks for Ghana govt from $2 billion bauxite deal

The Ghana government is likely to face political risks from its $2 billion bauxite deal with China’s Sinohydro, Global financial analyst Fitch predicts. MyJoyOnline reported that the report comes at a time when Parliament approved $500 million for phase one of the bauxite deal.

Under the deal Sinohydro will fund the infrastructure projects in Ghana, including roads, bridges, interchanges, hospitals, housing, rural electrification in exchange for refined bauxite.

Fitch said in its report that “The value of refined bauxite is likely to fluctuate, which - assuming the agreement is based on a monetary value for the refined bauxite - will see the amount of bauxite handed over to repay the debt potentially rise considerably. This could see the industry handing over much of its produce to China which may produce a domestic political backlash from opposition parties or from worker's unions, affecting social stability.

“If the value of bauxite were to plunge and Ghana could not meet the terms of the agreement there is a risk that Sinohydro or the Chinese state may use the position to extract political concessions. The failure to repay debts to a Chinese firm - incurred over a construction project - saw China take over control of Sri Lankan port Hambanthota, and although we deem such a scenario unlikely in Ghana, it highlights a risk that debt to Chinese firms can lead to political concessions being extracted.”