Tuesday, March 20, 2007

Valco, Ghana, Kwame Nkrumah

The closing of the Valco aluminum smelter in the Ghanaian port of Tema appeared as a minor item in yesterday's financial news. I must admit to knowing absolutely nothing about this smelter or its integral role in Ghana's economic history until this tidbit of current news awakened my interest. I did have some basic knowledge of Ghana's geography and political history, following with particular interest the recent 50th anniversary of Ghanaian independence.

The smelter at Tema was part of a bold plan for rapid economic development conceived by Ghana's first president, Kwame Nkrumah, during the 1960's. As his son, Gamal Nkrumah, relates:

Kwame Nkrumah laid the foundations for the industrialization of Ghana. He built the Akosombo Dam to generate electricity. He also built the Tema Harbour, which was a deepwater harbor, immediately after independence. So he was laying the foundation for the industrialization of Ghana.1

The Akosombo Dam on the Volta River had been planned by British engineers prior to Ghanaian independence, but construction was not begun until Nkrumah secured financial backing from the United States in 1958. It became one of the first large projects undertaken by the World Bank, with most of the hydroelectric power that it was to produce promised to the newly created Volta Aluminum Company (VALCO) for its smelter to be constructed at the port city of Tema. As can be seen from the map below, the damming of the Volta River created an immense lake totaling over 8300 km2 (3200 mi2). To administer the lake and dam, the Ghanaian Parliament established the Volta River Authority in April 1961 with Nkrumah as Chairman and six Board members.2

As part of the deal made with the World Bank and United States corporations, Ghana gave a written promise that the Tema smelter would not be expropriated. Nkrumah and his economic advisors did envision, however, that local bauxite ore would be exploited for aluminum production in a "vertically" integrated national industry. The newly formed VALCO, on the other hand, was controlled by American investors. Particularly influential was Nkrumah's close personal friend, Edgar Kaiser, a California industrialist who built the Akosombo Dam and went on to found Kaiser Aluminum to use its power.3 Kaiser, Alcoa, and other aluminum companies making use of the smelter have found it more profitable to ship alumina from their existing mines in Jamaica and other locations than to open up new operations in Ghana. The "invisible hand" of international trade seems to have made an unsustainable mess in this case, possibly contributing to the rundown condition of the smelter which has suffered at least two disastrous fires in the past two years. In closing the smelter, Ghana apparently intends to devote the power from the Akosombo Dam to providing more stable electricity to its citizens.

1Nkrumah, Gamel, 2007, Interview with Amy Goodman,
Democracy Now, March 6th

2Moxon, James, 1984, Volta - Man's Greatest Lake. London: Andre Deutsch.

3Burnett, Nicholas, 1980, Kaiser Shortcircuits Ghanaian Development. Multinational Monitor, v. 1, no. 1.

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At 2:54 PM , Blogger George said...

"Ghana apparently intends to devote the power from the Akosombo Dam to providing more stable electricity to its citizens."

It'll be interesting to see the economic effects of that on Ghana.

At 5:38 AM , Anonymous McLOVIN said...

in 2005 Ghana purchased 90% of the shares for the smelter from Kaiser, intending to restart processing. With the process starting in 2006 the Ghanaian government purchased the last 10% of shares enabling it to exploit its own Bauxite mines. A drought in 2008 led to the shutting down of the plant due to lack of electricity.

At 8:50 AM , Blogger Don Thieme said...

Thanks for the update, McLovin. I wonder whether the dam is generating electricity or not?


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