Establish lithium exporters’ cartel for Ghana’s lithium
Civil Society advocates active in the natural resources policy space in Ghana have been left disappointed by the failure of imagination among politicians and senior civil servants negotiating Ghana’s first lithium mining lease.
News that Ghana had signed a mining lease with an Australian junior miner to produce lithium from 2025 therefore raised hackles.
Answering that question, especially in relation to the agreement Ghana has just signed, requires a bit of a detour to explore why such hype has been building around lithium in the first place.
In the 21st century, lithium had been found to be more applicable across areas such as ceramics, glassware, polymers, castings, medicines (of course), and others. Today, more than 85 per cent of all lithium demand is for use in lithium-ion batteries.
Some analysts believe that by 2050, lithium would have seen the fastest growth among all the minerals usually associated with the green transition.
The question on the lips of civil society observers is whether the Ghanaian people, by law are the ultimate owners of the resource, over the 12-year course of mining of these deposits in the Ewoyaa region of the country’s central coast.
As is widely known, Zimbabwe is Africa’s largest producer of lithium and yet, the country is on course to make just about $250 million from the mineral this year, out of total mineral earnings of about $5.67 billion.
We should also not forget that Ghana, in a good year, can generate more than $6.6 billion from gold exports (how much of that actually stays within the economy is a different matter). Despite all the hullabaloo about Africa’s lithium, the continent currently holds only about five per cent of the world’s known reserves. All this to say that the lithium game is just beginning. Any premature excitement is likely to be, well, premature.
That notwithstanding, there are interesting aspects of the lithium value chain that requires that countries not take a business as usual approach as has been done to cocoa and other natural resources, things can be different in the case of lithium.
Provided one refines lithium into the form, such as lithium carbonate or hydroxide that can be used in battery components like the cathode one can capture 30 per cent of the value of the battery.
These value chain margin analytics are further compounded, as hinted earlier, by the fact that valuable lithium end-products like batteries often require other green minerals to make, interlinking the economics of lithium with that of various strategic compliments.
With that highly condensed crash course out of the way, we can begin a discussion about Ghana’s contract with Atlantic Lithium and start to shed light on why some in Ghanaian civil society believe that government ministers and the officials advising them are being too self-congratulatory.
It is common knowledge in Ghanaian natural resource settings that the share to the state of resource gains was heftier in the 1970s and the early 1980s, and even after reforms came in the late 1990s, those terms were generally more favourable than what ensued in the subsequent decades.
The Ghanaian government, according to IMANI Ghana, introduced policy to set a floor of 55 per cent under the ownership stake of the state in producing mining concessions in the 1970s but, the Chief Executive of the Minerals Commission has recently sought to imply that this history does not count because it encompasses a period of wholesale nationalisation.
In substance, therefore, if we are to limit ourselves purely to the split of gains between the government and the private investor, then both the purely negotiated 1969 Ghana – Ashanti Gold agreement and the, decree-backed, 1972 agreements between the same parties were better than the recent lithium deal by having offered the State 20 per cent and 55 per cent (compared to the 13 per cent in the lithium deal), respectively, of the total equity in the concession.
Confining ourselves to the narrow dimension the government of Ghana itself has selected, we can boldly assert that the claim that the terms of the recent lithium deal are the “best” in Ghana’s history is factually inaccurate. It is important that senior civil servants of such high stature strive for objectivity in their public communications.
The heart of the matter though is that nice fiscal terms on paper, however “generous” to Ghana, however “resource nationalistic”, would not mean much if overall management of the sector and/ or the investment climate is bad. Contracts and leases should thus be designed in such a manner that they will prove resilient even in the face of weak regulatory performance.
The Atlantic Lithium’s off take agreements and customer-financing strategies reflect the fast changing dynamics in the green economy as companies and governments jostle to position themselves well to avoid being outmaneuvered by trends.
We should also not lose sight of the fact that the Atlantic Lithium mining lease was framed in terms of a victory of the US against China since this is the first time an American company has secured access to a significant source of lithium from Africa to feed an American refinery (the Piedmont facility in Tennessee). Chinese investors, on the other hand, have won quite a number of these hits.
Could Ghana have leveraged these geopolitical stakes to secure more involvement by American suppliers of complementary inputs and resources to make the path to value addition much clearer?
The issue of whether Ghana could have done better if it had used more competitive methods to allocate lithium mining concessions has come up which is what I want us to discuss.
Examples abound in the world that whenever nations which produces a certain natural resource come together to form a cartel like OPEC for petroleum producing countries, they make better sales from the product.
It is therefore my humble suggestion that the government of Ghana can negotiate with other lithium producing countries in Africa such as Zimbabwe, Angola and the rest to form African Lithium Producing Countries, like OPEC for petroleum producing countries where the body can bargain higher on the international market
If this lithium situation has thought us anything at all, it is clearly that “good” may sometimes not be good enough. The government is to be commended for having the presence of mind to understand the citizenry’s demands for “better than usual”. It must now show readiness to deliver that “better” in this and upcoming mineral rights issues by the formation of a cartel.
BY BISMARK ABOAGYE
