Feature: VALCO, the heart of Ghana’s aluminium industry

The Volta Aluminium Company (VALCO) is a very well-known name on the country’s industrial landscape, and for obvious reasons.

VALCO is perhaps the country’s largest industrial enterprise in terms of technology and employment and revenue generation. More importantly, it is the mother that gave birth to the giant Volta River hydroelectric project.

At the time of the construction of the hydroelectric dam at Akosombo, there was the need to guarantee a ready consumer of the enormous power that was expected to be generated, since Ghana’s industrial base was very small.

Funding institutions were not ready to finance the project at that huge cost if there was no evidence of an industrial base that could utilise the power and, consequently, pay for the investment.

VALCO, therefore, became a strategic team player when a consortium of aluminium companies, headed by Kaiser Aluminium and Chemical Corporation, decided to build an aluminium smelter in Tema as the primary consumer of the power from Akosombo.

Even though the long-term agreement which guaranteed VALCO first-choice status in the use of power from Akosombo may not be the most favourable, Dr. Kwame Nkrumah took consolation from the fact that no matter how long the power-sharing agreement went on, and the Akosombo project would surely outlive that agreement.

More significant is the fact that Dr. Nkrumah had already calculated the benefits of the dam and the smelter to Ghana’s future industrial advancement, with the aluminium industry playing a lead role.

With huge deposits of bauxite at Kibi, Nyinahin and Awaso which, at conservative estimates, could last more than 200 years at the current production capacity of VALCO, Dr Nkrumah foresaw an integrated aluminium industry (IAI) taking shape in the country.

Ghana, I am beginning to believe, has a special place in the heart of God. It is perhaps the only country that has all the major raw materials needed for an integrated aluminium industry. First, we have the bauxite in abundance; we have salt and lime, which is needed at the refinery level and abundant resources for smelter.

Knowing how multi-nationals operate, I am not surprised that after nearly 40 years of VALCO’s existence, we have still not attained full integration as was Kwame Nkrumah’s dream when the VALCO agreement was signed. They prefer to segment their operations, so that should there be any hostile political decision, they will not suffer unduly. So while we export bauxite at approximately US$25 per metric tonne (mt).

VALCO imports alumina at approximately $400/mt for its operations and after processing the alumina, sells its aluminium ingots at approximately $2,500/mt.

The vast difference between the price of the ore and the price of aluminium ingots and billets is a clear indication of a disservice to this nation so long as we continue to scrape our bauxite and sell it cheaply on the world market when we have better use for it.

As fate will have it, something that we never expected happened when Alcoa sold its last 10 per cent shares in VALCO to the government of Ghana in 2008, ending all foreign involvement in the ownership in VALCO.

What a coincidence that the ownership of VALCO changed hands just as Ghana made a breakthrough in the discovery of oil and gas.

The benefits of an integrated aluminium industry cannot be over-emphasised.

Apart from job-creation along the chain from the mining level to the industrial level where aluminium products are converted into finished products, there will be foreign exchange conservation at all stages, such as the $186 million VALCO presently spends on the importation of alumina.

The energy situation will, also, improve dramatically since about 100MW of electrical energy could be generated from steam from the alumina refinery. Other alumina refinery by-products can be used for housing construction.

The greatest explosion will be experienced at the industrial level when the end users of VALCO’s products; such as Aluworks, Tropical Cable, Western Rod, and Wire, Ghana Pioneer Aluminium, and others can expand their plants, while players can join the band wagon.

Ghana is close to a middle-income status not on paper, but in reality. VALCO is currently operating less than 30 per cent capacity of 200,000MT, per annum. This will change when full power is restored and all the five pot-lines are put into full operation.

VALCO gave the economic justification for the building of the Akosombo Dam. It gave meaning to Nkrumah’s vision for integrated aluminium massive quantities.

The question is; now that we have VALCO, what are we going to do with it? Incidentally, the smelter is the most expensive both in terms of technology and cost and for that matter the most strategic in the aluminium production chain and, therefore, once we have the smelter, the only thing we need to complete the chain process is the refinery.

Industry in Ghana today, as a fully Ghanaian company, VALCO, is poised to lead Ghana into full industrialisation. It requires political will to get the refinery established, a protective cover to shield the company from political manipulation and watch Ghana move alongside Brazil, South Korea, China and India.