Sinohydro Deal: Experts warn of massive hidden costs

The recent announcement of the release of the first tranche (US$ 649 million) of Chinas Sinohydros US$ 2billion has come with massive excitement, however, there are massive hidden costs that may send Ghana the way of Kenya, Uganda and Zambia, experts have warned.

For instance, a copy of the Sinohydro Master Project Support Agreement (Construction of priority Infrastructure Projects) document intercepted by Whatsup News shows that Ghana will cough up a whopping US$150 million as interest and fees on the approximately US$500 million estimated for the engineering, procurement and construction works of the 68 earmarked road projects in the deal.

This deal has been described by critics as outrageously expensive. The interests and fees, constitute approximately 30 per cent of the money Ghana would receive from China. Out of the amount, management fee is pegged at $4.1m; Commitment fee from Ghana is at $2.6m; Insurance tagged at $ 62.2m and interest peaking at $80m.
Under the Sinohydro deal, the cost of constructing the proposed road infrastructure totalling 442 kilometres would mean that every kilometre of road costs a US$ 1 million.

According to experts from the previous administration of the National Democratic Congress (NDC) the costs of similar roads per kilometre during their era was approximately $250,000.

The agreement is also a Buyers Credit facility and a Deferred Payment Agreement which has Ghanas Sovereign Guarantee embedded in it. It means that in the case of breaches, China can easily appropriate important state resources to offset the loan.

Critics have warned that China has tried this same trick on several African countries, including Kenya, Uganda, Zambia, among others and have been forced to relinquish important state resources such as ports to China as a recouping mechanism for funds loaned to these countries.

During the launch of the IMFs Global Stability Report in Nigeria on Wednesday, the Director of Monetary and Capital Markets of the IMF, Tobias Adrian warned African countries to be wary of funding from China, as they come with hidden conditions.

What is important in lending arrangements are the terms of the loan and we urge countries to make sure that when they borrow from abroad [China] the terms are favourable, Adrian said.
Earlier this week, Ghanas Minister of Information, Kojo Oppong Nkrumah announced the release of the first tranche of a proposed US$ 2 billion funding from China in exchange for Ghanas bauxite.

The money is expected to be used for the completion of some 68 roads nationwide. The road projects are expected to begin by the close of this year and be completed in 2020.

Source: Whatsupnews Ghana

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