Energy transition and the lithium controversy

Female-run SMEs and youth at the heart of AfCFTA
Amos Safo is a Development and Communications Management Specialist, and a Social Justice Advocate.

In September 2023, Ghana’s government launched a US$550billion Energy Transition and Investment roadmap toward achieving net-zero carbon emissions. The plan has capacity to create an estimated 400,000 jobs by 2060, according to details of its plan – which was developed by government and SEforALL. The plan was launched by President Nana Akufo-Addo during a Global Africa Business Initiative event in New York.

The plan marks Ghana’s commitment to fighting climate change and fostering economic development, and outlines a blueprint for how Ghana can achieve net-zero energy-related carbon emissions by 2060 through the deployment of low-carbon solutions across key sectors of its economy, including oil and gas, industry, transport, cooking and power.

A few weeks ago, Ghana launched a national electronic vehicle policy to help decarbonise the transport sector in line with the Ghana National Energy Transition Plan 2022- 2070 and global commitments on climate change. These policies form part of government’s strategy to engage the international community and investors for support for its energy transition.

Government expects an estimated US$550billion from the international community to invest in sustainable development toward Ghana’s zero-net carbon emissions. Four main decarbonisation technologies – renewables, low-carbon hydrogen, battery electric vehicles and clean cookstoves – will cover over 90 percent of the targetted abatement by 2060.

Previously, Ghana Energy Transition Framework targetted a net zero by 2070; but this forecast has been reduced to 2060, ten years ahead of the previous target – a review that signals the seriousness government attaches to reducing carbon emissions and promoting sustainable development.

Environmental experts say without pursuing the current strategy, Ghana’s emissions are expected to rise from 28 Mt CO2e in 2021 to over 140 Mt in 2050, with the bulk of emissions growth coming from transport, high population growth, GDP per capita growth, unsustainable mining and more carbon-driven vehicle ownership.

Ghana and its partners are optimistic of bringing the country’s energy sector-related carbon emissions to net zero, while demonstrating that action against climate change does not need to come at the expense of economic development.

“This plan is a testament of our dedication to fostering green industries, nurturing the evolution of cutting-edge low-carbon technologies, and propelling our nation toward a sustainable industrial revolution while giving equal growth opportunities to men and women,” President Akufo-Addo said at the ceremony.

“Ghana’s commitment to a just and equitable energy transition has translated to an ambitious plan that builds a case for low-carbon and energy-efficient solutions across Ghana’s entire energy system. These solutions present a tremendous opportunity for partners and investors from around the world to contribute climate action and sustainable development assistance in Ghana,” says Damilola Ogunbiyi, Special Representative of the UN Secretary-General for Sustainable Energy and Co-Chair of UN-Energy.

Lithium controversy

The energy transition plan comes on the heels of Ghana’s discovery of lithium in large commercial quantities. The most important use of lithium is in rechargeable batteries for mobile phones, laptops, digital cameras and electric vehicles. Experts say lithium holds strategic importance as a green mineral in the country’s ongoing energy transition journey. Generally, the discovery of lithium is a good omen for Ghana since renewable energy is gathering momentum as an alternative to hydrocarbons.

The contract between government and Barari DV Ghana Limited – a subsidiary of Atlantic Lithium Limited – has quite expectedly generated political and economic debates across the country. The US$250million project – located at Ewoyaa, Mfantseman municipality in the Central Region – includes a 10% royalty and 13% free carried interest in the state; which is an improvement on the previous or existing 5% and 10% respectively for other mining agreements. Government argues that the royalty rate has been increased to 10 percent from the standard 5 percent, and the state’s free carried interest in the mining operation has been increased from 10 percent to 13 percent.

Key features

Some key features in the policy include an increase in royalty rate; increase of Ghanaian participation in all green mineral operations to a minimum of 30 percent; enhanced local content and local participation, including listing on the Ghana Stock Exchange; and value addition and beneficiation.

The lease covers an area of approximately 42.63 square kilometres, and grants the company exclusive rights to work and produce lithium and associated minerals in the area, in accordance with the country’s mining laws. Under the deal, Ghana has a share of 13% from the lithium proceeds while a hefty 87% goes to the foreign investors. However, government argues that the 13 percent share is the best deal for Ghana since independence.

But the mining lease agreement between Ghana and the Australian company to start prospecting for lithium by 2025 has raised eyebrows among many stakeholders. While many stakeholders are optimistic that lithium can bring enormous benefits to the country, unlike oil and gold, others argue that the nature of the contract amounts to selling Ghana’s lithium for a song.

Civil society advocates in the natural resources policy space have expressed grave concerns over the failure of government to negotiate a better deal for Ghana. Government was expected to use this opportunity to correct the historical injustice of western countries dominating and controlling Africa’s mineral resources for the benefit of their countries while Africans wallow in poverty.

The recent abrogation of mining contracts in Niger, Burkina Faso and Mali has been hailed by Pan-Africanists as a victory in Africa’s struggle for economic independence. Recent global economic forecasts indicate that Niger and Burkina Faso are the fifth and ninth fastest-growing economies in the world after they nationalised their uranium and gold from French companies.

Amid the controversy, the Institute of Economic Affairs (IEA) organised a forum to gauge public opinion on the contract. Professor Ransford Gyampo-University of Ghana, was one of the discussants who argued the agreement that gives Ghana a mere 13% of lithium proceeds and 87% to foreigners is a gross error on the part of government. Similarly, Bright Simmons of Imani Ghana explained that in 1969 Ghana negotiated a better deal under the Ashanti Gold agreement that offered the State 20% and 55% of royalty as revenue respectively, compared to 13% and 10% in the current lithium deal.

Of grave concern to the deal’s critics are a low 10% royalty rate and 1% levy; 35% corporate income tax rate and 13% government free-carried interest in the operating company. Many Ghanaians are worried over a hidden clause that gives the company a tax holiday of 10 years, as well as company operating on subsidised electricity. The issue of giving free electricity to a company that is supposed to profit from 87% of the proceeds reminds Ghanaians of the Ameri and Karpower deals in which government was supposed to provide free gas for the companies to generate power for sale to the very government. The question is, who will bear the cost of electricity tariff? It appears our current policymakers are not learning from the past mistakes of previous governments.

Joint ventures

Furthermore, government has attemptrd to justify granting the lease or concessions to the Australian government.  However, speaking on the IEA platform, former Chief Justice Ms. Sophia Akuffo contended that a ‘joint venture’ agreement or ‘service contract’ are preferred legal vehicles as opposed to a mining lease or concession. In a counter-comment, Kofi Ansah and Fui Tsikata argue that ‘joint venture’ and ‘service contract’ are too broad to adequately explain the mechanisms under the contract. According to them, a legal entity with more than one shareholder can be called a joint venture between the shareholders.

Kofi Ansah and Fui Tsikata further submitted that those who are proposing a joint venture are probably unaware that government would be compelled to commit money for mine development, and engage contractors who have no legal rights in what is to be mined. Given the current economic conditions in Ghana, perhaps government will be unable to provide counterpart investments.

The unfolding debates between government and civil society organisations suggest government has failed to take advantage of the increasing significance and demand for lithium. They argue that given growing demand for the commodity, government should have negotiated a better deal for current and future generations.

For example, the governments of Mexico and Australia have deployed prudent policies to own majority interest for the commodity. Ironically, while it is an Australian company that has won the contract in Ghana, the Australia government has recently directly invested US$4billion into developing its lithium.

The signal is that many African countries, including Ghana, are failing to take advantage of new minerals to reframe existing mining and minerals contracts for the benefit of their countries. In other words, Lithium and the family of critical minerals are now so important that our government should have made the right policies to break our economy from the existing post-colonial mining framework’s shackles shackles.

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