2009

Anthony Tsekpo

8/25/2009

Salt Market Survey Report of Demand for Salt and Chlor-Alkali Products in West Africa

Project No. 8.ACP.GH.271

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Contents Executive Summary ............................................................................................................ 3 Introduction ......................................................................................................................... 4 Objectives of the Study ....................................................................................................... 5 Methodology ....................................................................................................................... 5 Industrial Structure.............................................................................................................. 6 Performance of Industry ..................................................................................................... 8 The Chlor Alkali Industry in West Africa .......................................................................... 9 Installed Capacity.............................................................................................................. 10 Estimated Domestic Demand ............................................................................................ 15

Demand for Edible Salt ................................................................................................. 16 Industrial Requirement of Salts .................................................................................... 16

Forecast of Industrial Salt Requirements .......................................................................... 19 Combined Domestic and Industrial Demand .................................................................... 20 Structure of the Salt Market in West Africa ..................................................................... 20 Strengths and Weaknesses of Current Suppliers .............................................................. 23 The Fiscal Regime ............................................................................................................ 24 The Nature of Ports ........................................................................................................... 24 Conclusions ....................................................................................................................... 25 Recommendation ........................................................................................................... 27

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Executive Summary The solar salt industry in Ghana currently produces less than 300,000 tons even though it is has an estimated capacity of about 2.5 million tons. The untapped potential is largely attributable to the dominance of artisanal producers in the industry. Fortunately for Ghana production and marketing of salt in the entire West African sub-region is dominated by artisanal producers and informal production and marketing networks. Whilst the domestic demand for salt remains relatively stable the potential to export salt and chlor alkali products to the industrial sector in the region remains a viable option. The market for salt and salt derivatives in Nigeria alone is estimated at over US$145 million or anything between 2.7 and 4.6million metric tons. In addition the demand for caustic soda by the alumina producers in Guinea and other chemical industries is well of 3,000,000 metric tons per annum. Water purification is one other area where the estimated demand for chlorine which is a major by-product of caustic soda production is in high demand. Industrialist in the sub-region have made it clear that the most important consideration in the procurement of salt and salt derivatives for their operations include cost effectiveness, quality of product and an efficient and uninterrupted supply. Under the circumstances Nigeria emerges as the potential destination for the bulk salt from Ghana. At current production cost of approximately US$35 per ton Ghana will be competitive in the Nigerian market if it is able reduce the cost of transport to US$10 per ton or lower. A recommended strategy for Ghana to improve on its competitiveness in the Nigerian market and beyond is to improve the scale of production in order to take advantage of the economics of scale. Ghana must of necessity also find more cheaper alternatives to road transport which has dominate the movement of salt so far. Bulk movement by sea to Nigeria is the key to lower transport cost in that market. With respect to the establishment of any chlor alkali plant as part of any modern salt works, it is recommended that industry operators be consulted to ensure that the output meets their specifications since some have indicated their willingness to be part of the planning and development of any such production facilities to ensure that their specific requirements are part of the scheme from the development phase. For the sake of the environment any chlor alkali plant must ensure the utilisation of all the chlorine that is produced as part the process.

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Introduction The salt industry has been identified as a natural endowment with enormous potential for income generation on Ghana. Salt is often characterized as white gold, suggesting that Ghana can earn as much from salt as it currently derives from gold. The potential has always been cited as capable of yielding for the country a substantial return in foreign exchange. However, there has been limited effort to quantify the potential earning from salt. One of the objectives of the mining sector reform project is therefore to estimate the potential demand for Ghana’s salt in the immediate sub-region of the ECOWAS. The decision to focus on the immediate sub-region is based on the understanding that salt is a bulky commodity that is expensive to transport. Estimates suggest that transport costs form approximately 90 percent of delivery price of salt. Under the circumstances it is only rational to assume that Ghana will be able to deliver the commodity to neighbouring countries in the sub-region at lower cost that can be done by countries like Namibia, South Africa, India, Brazil to name a few of the current sources salt imported in the sub-region. The study aims to identify and quantify the potential demand for Ghana’s salt and consumption of chlor-alkali products in the West African sub-region with particular emphasis on the targeted countries. Although geo-physical conditions favour Ghana as a salt exporter future domestic demand must not be underestimated as Ghana prepares towards commercial production of crude oil in 2010. The salt industry in Ghana must position itself to take advantage of a potentially vibrant petro-chemical industry. Furthermore, it is always a difficult task to enter into a well established market. It is therefore an uphill task for Ghana to convince targeted countries to review their established supply links and look up to Ghana for their supplies. Accordingly, the study will explore the strategies for conducting such negotiations to enable Ghana make the most out of its natural salt production capacity. The barriers to information disclosure notwithstanding the end of the study has made robust estimates of the potential demand and associated conditions of trade including fiscal regimes in West African sub-region. The market for salt in the sub-region is so diffused that the main strategy for making the right impact is likely to be price and guaranteed supply. Ghana must be able to produce on a scale that will stimulate cost effectiveness and least cost pricing. As far as industrial users of salt and salt derivatives like the chlor alkali products are concerned Ghana must adopt the strategy of planning and establishing any salt work and associated chemical plants with major stakeholders as found in the alumina and petro-chemical industry. Also the willingness of current salt processing plants in Nigeria to consider backward linkages by collaborating with National Governments and other investors to establish modern salt works must be effectively explored.

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Objectives of the Study Over the year policy makers have identified low quality of output and low capacity utilisation as the key confounding characteristics of the salt industry in Ghana. Thus to liberate the latent potential for expansion in output, the main objective of this market study as defined in the Terms of Reference is to establish the actual total demand for salt per annum in the target countries especially Ghana, Nigeria, Guinea, Togo, Burkina Faso, Cote D’Ivoire, Niger, Mali, Benin and Cameroon. The project will also seek to identify the uses of salt and the specification of salt for the various end-uses. Apart from salt, the study also attempted to estimate the level of consumption of chlor-alkali products in the target countries to enable a decision to be taken on whether or not to establish a chlor-alkali industry in Ghana and at what capacity.

Methodology To complete this study two main approaches were adopted namely, the review of secondary data available on the salt and chlor-alkali industry in the West African sub-region and quick surveys of key identifiable stakeholders in the industry in selected countries. As part of the terms of reference the following tasks, among others, were undertaken in pursuant of the objectives of the survey stated above:

Desk studies of available reports on production/trade in salt and chlor-alkali products in the target countries i.e. Ghana, Nigeria, Togo, Burkina Faso, Cote d’Ivoire, Niger, Mali, Benin and Cameroon.

Limited survey of current levels of production, distribution and sales potential of salt and chlor-alkali products in Ghana, Nigeria, Benin, Cote d’Ivoire, Senegal, Guinea and Niger. Whilst in these countries the survey team worked to have a quick overview of: (1) The extent and structure of the market in each countries. (2) Major suppliers and clients in the salt trade (3) The nature of contract/agreements that exist between clients and

suppliers in the various countries with emphasis on the specification of salt products delivered to the client and their delivered prices.

(4) The strength and weaknesses of the current suppliers. (5) The nature of ports that receive imported salt, i.e. the capacities of

vessels reporting at the ports, level of mechanization etc. (6) The end uses for salt and chlor-alkali products in the target countries

and any future plans of expanded consumption. (7) The cost at which salt is delivered at the various destinations and the

underlying explanatory factors. (8) Any salt beneficiation facilities that exist in the target countries and

their capacities

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(9) The annual salt imports and exports in the target countries in the sub-region.

(10) The rules and regulations concerning packaging, handling, taxies, levies, fiscal incentives in the salt trade in the target countries.

The survey which took the form of informal interviews was supplemented by visits to production facilities and port facilities in the targeted countries to gain insight into the state complementary facilities in the region. During these visits we examined in detail the nature of port facilities available to take delivery of imported salt. The review of the state of port facilities is to enable private investors to make decisions on whether to invest in chlor-alkali industry and the Government to make decisions about establishing the necessary infrastructure such as jetties, harbours and rail links to facilitate the salt industry development.

In Ghana we also identified areas where a multipurpose jetty or mini harbours could be established to transport salt to neighbouring countries especially the target countries. This exercised was based on the land use map prepared by the Mineral Commission and the potential areas earmarked for maximum salt production Finally, the study did a strategic review of what options are available to Ghana to gain market access in the sub-region.

Industrial Structure The study seeks to identify the potential markets for the possible up-scale of solar salt production in Ghana. Salt production from seawater or from natural brine as it is often called by solar evaporation is the most common method of producing salt and this method has been practiced for centuries along the sea coast of Ghana. Ghana possesses one of the largest proven renewable solar salt production potential along the entire coastline stretching over a distance of over 500km. Effective exploitation would enable the country to supply the needs of the entire sub-region. Solar salt is produced by the action of sun and wind on seawater or natural brine in lakes; both temperature and salinity are important. The water evaporates in successive ponds until the brine is fully concentrated and salt crystallizes on the floor of the crystallizing ponds. It is advisable that solar salt plants must be located in areas of low rainfall and high evaporation rates, and where suitable low-cost labour is available. The inventory of the existing infrastructure and the natural endowments for the sustainable development of solar panning of salt in the coastal belt of Ghana is extensive. It is apparent that the only area in the sub-region with comparable climatic or better is the coast of Senegal which has in some places a longer spell of dry season.

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The literature on the current state of the industry shows that production of common salt is an age old traditional industrial activity in many coastal communities in the country. The industry is characterized by micro, small and medium scale producers scattered along the coastal districts such as Dangbe East, Dangbe West, Ga, Awutu-Effutu, Gomoa, Keta, Ketu and Mfantseman (Mensah and Bayitse, 2006).

Current estimates suggest an annual production of between 200,000 and 250,000 metric tons. It has been observed that the annual production of 250,000 metric tons falls far short of the potential for commercial production estimated at 2.5 to 3.0 million metric tons per annum (MOTI, PSD, PSI, 2007) For Ghana to join the league of commercial producers total industry output should not be less than 1,000,000 metric tons per annum.

The low total industry output has been attributed to inefficient production methods, obsolete machinery and lack of capital and industry information as well as weak production infrastructure. In a recent audit of the industry Teruel (2007), a Marine Biologist from Venezuela pointed out that about 99 per cent of the companies suffer from management deficiencies that adversely affect total salt production. Out of 20 companies surveyed by Teruel only one company met the industry standards by combining efficient technology for solar salt operation with effective management of its operations. Capacity utilization has been identified as one of the challenges to the industry but what is not clear is whether this can be attributed to limited demand for their output. The current production practices in the solar salt industry in Ghana can be classified broadly into two – salt winning (mainly with the aid of dug outs) practiced by micro and small scale producers and salt works practiced by medium scale producers. Salt works refer to the procedure whereby facilities are constructed on a flat land to control sea water inlet, followed by a series of evaporating ponds to enable sequential concentration of seawater by solar evaporation until salt is crystallised in crystallising pans (Garcia, 1993). The advantage of the salt works technique is that it permits an accurate calculation of such parameters as brine flow rate, rate of evaporation and specific gravity of brine, making it possible to forecast production targets and the quality of output. Majority of artisanal producers (micro and small scale producers) employ the salt winning techniques which do not allow such computation, making the forecasting of output less accurate but more importantly compromising the quality of output. Mensah and Bayitse (2006) observed that a serious handicap to the salt industry is the relatively poor quality of salt produced by small scale producers who use the salt winning technique - often attributed to wide fluctuations in temperature and the composition of the brine at the time of

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crystallization. The situation is aggravated by faulty layouts of many of the works as well as a lack of adequate technical control during crystallisation. The production techniques notwithstanding the literature suggest that total output of salt is always affected by the intensity and distribution of rain along the coast. As a result there are no salt production activities in areas where the rainfall is high in the months of May-June.

Performance of Industry Ghana's annual production of salt of 250,000 metric tons falls far short of her potential for commercial production estimated at 2.5 to 3.0 million metric tons per annum. A more recent study by Omani (2009) estimates that salt production capacity of the Songor and Keta lagoons is between 1.5 and 2.5 million tons. Table 1 below shows the trends in solar salt production in Ghana in the past decade compared to what have been produced elsewhere in the sub-region.

Table 1: Trends in Salt Production in Selected West African Countries (‘000 metric tons)

Ghana Senegal Guinea 2000 150 124 15 2001 68 110 15 2002 99 172 15 2003 250 235 15 2004 265 168 15 2005 250 134 15 2006 250 199 15 2007 250 212 15

Source: The USGS Minerals Yearbook 2007, volume III, Area Reports—International. The production figures were obtained from the United States Geological Survey Mineral Yearbook. This happens to be the most consistent source of information on production by the different countries. The series which combines reported figures with estimates is however consistent with the incomplete series that were collated by the survey team in Ghana, Guinea, and Senegal where quick appraisals of salt production and marketing were undertaken. The table shows that salt output in Ghana has been stagnant despite the attention given to the industry by policy makers. It is apparent from the production figures that the intent of policy makers has not been matched by the requisite investment in the industry. Policy makers have in the past focused their attention on small scale mining including salt because of the potential for poverty reduction. The Ministry responsible for mines estimated that between 20,000 to 30,000 people were involved in the small-scale production of industrial minerals, which included

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kaolin, limestone, salt, and sand and gravel (Coakley, 1999 – Ghana mining Industry). The growing informal economy since the inception of the structural adjustment programmes and the growing demand for the products in the chemical industry make salt production an attractive sector for investment as it has the potential of absorbing those displaced from the formal sector. To boost small scale salt production and also promote iodisation the World Food Programme (WFP) in partnership with the President's Special Initiative, the Micronutrient Initiative, Technoserve and UNICEF, has over the past two years, been strengthening the technical, business and marketing capacity of two small scale salt producers - Tradevco Salt and U2 Company; two cottage scale producers - Nyanyano Salt Producers' Association with 200 members and Anlo Afiadenyigba Cooperative with 250 members. Three women's groups in the Northern and Upper East Regions have been linked with these producers as retailers. The WPF iodine initiative worth US$590,000 to support global efforts to combat iodine deficiency disorders in Ghana provides technical assistance in the form of eight mobile salt iodization units, in addition to business and marketing training to the small and medium scale salt producers. This is intended to contribute to increased production, distribution and promotion of iodized salt and ultimately, to the achievement of Universal Salt Iodization in Ghana. The major salt works in the country include Songor Salt Project Ltd, Ningo Salt Ltd, Sege Salt works Ltd, Panbros Salt, Elmina Salt Producers Association and U-2 Co. Ltd. The rest are Tradevco Salt and Trading Ltd, Petua Salt and Company, John Haris Salt Company, Pakat Salt Company Ltd and Sastin Salt Ltd. Inefficiencies in production make it very difficult to establish the cost of production with any accuracy. However, producers estimate that it cost approximately US$35 to produce a ton of salt in Ghana.

The Chlor Alkali Industry in West Africa There is a large potential for the utilisation of part of the salt produced in Ghana and elsewhere in the sub-region to produce caustic soda which is a raw material for the soap and detergent industry; and bauxite/alumina production. The chlorine co-product can also be used as water treatment chemical and also serve as raw materials for the production of various health and sanitation chemicals. Salt is a major input in the manufacture chlorine and sodium hydroxide which are key output of the chlor-alkali industry. Salt is a popular raw material in the industry as it is the cheapest and most common source of soda and chlorine. The technical estimates show that approximately 1.75 tons of salt are required to make 1 ton of chlorine and 1.1 ton of caustic soda co-product. The chemical industry in Ghana and the entire sub-region produce paints, varnishes, drugs, soaps, detergents, cosmetics, rubber and plastics as well as

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insecticides, mosquito coils, candle, glue, industrial starch, etc using imported inputs. The chemical industry is heavily import dependent for raw materials except for local inputs namely palm oil for soaps and natural rubber for rubber products. As a result of import constraints, the sector is characterised by low capacity utilisation with only 17% of firms operating between 69-79% installed capacity and 33% of firms operating under 20% installed capacity. The sector is hard-hit by the recent trade liberalisation, having to compete with imported products both in quality and price. The situation is not different in the other countries included in this study. In Nigeria it is estimated that the country imported N13 Billion worth of caustic soda in 5 years and the textile industry is one of the major sectors of the economy that has been hit hard by the rising cost of caustic soda imports. In general the chemical industry is characterised by the use of complex process technologies, sophisticated marketing strategies and inter-industry competition. For the sector to remain competitive, it requires linkages with local production of basic chemicals. The chlor-alkali industry provides the necessary linkage. The major requirement of the existing chemical and allied industries is the intermediate product - caustic soda. The largest consumers of caustic soda are soaps and detergents factories, plastics, paints and pharmaceutical industries. Large quantities of caustic soda are used in the textiles, paper and metallurgical industries and in the production of synthetic fibres. The high demand for caustic soda occupied the attention of investors for the past three decades; however, investment in the chlor-alkali industry was constrained by lack of local market for chlorine, a major product of the chlor-alkali plant. The value of caustic soda imports has been significantly higher in Nigeria. Interactions with major detergent manufacturers namely, Unilever and PZ indicate that they import their caustic soda requirements directly from Europe. The main considerations in their import plan are the cost and guaranteed supply.

Installed Capacity The installed capacity of current salt works in Ghana together with all artisanal production can produce up to 400,000 metric tons per year. However, due to constraints to capacity utilization the current output of the country is approximately 250,000 metric tons. The situation in Senegal which is the major competitor is not different from what pertains in Ghana except that only two plants produce about two thirds of the estimated 400,000 metric tons in that country. The most modern salt work in the region can be found in Kaolack, Senegal and it produces approximately 200,000 metric tons of salt per annum for export outside Senegal or the ECOWAS Region. Selsine in Fatick which is the second largest modern slat works in Senegal produces only 40,000 metric tons per annum. This is about the same level at which the 3 most important salt works produce in Ghana.

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Table 2: Production Capacity of Major Salt Producers in West Africa Company Estimated Output

(Metric tons) Method of Production

1 Songor Salt Project Ltd, 44000 Salt pan 2 Ningo Salt Ltd, 16,000 Salt pan 3 Panbros Salt 64,000 Salt Works 4 SELSINE 40,000 Salt pan 5 STE NOUVELLE DES SALINES

DU SINE SALOUM 200,000 Salt Works

More generally, production of salt in West Africa is largely on artisanal basis. Apart from Ghana and Senegal where there are modern salt works all other salt production in West Africa remains in the artisanal mode. The most popular salt production site in Senegal located at Lac Rose near Dakar is an artisanal production unit controlled by cooperatives that together produce approximately 60,000 metric tons per year.

In Nigeria it is said that there is abundant natural brine in lakes, springs and saline and rock salt deposits which is yet to be discovered in any part of the country. In spite of the abundance of the sources of salt in the country, the processing of the commodity is only done locally by rural dwellers. Documentations are available showing various indigenous salt processing methods in several locations in Nasarawa, Ebonyi and Kebbi states.

Similarly, salt production in Benin, Cote d’Ivoire, Guinea and Niger are all purely artisanal endeavours. Artisanal salt producers in Benin who are located at Ouidah, Come and Grand Popo produce about 20% of the edible salt needs of Benin. Artisanal salt producers are located near the sea and lagoons at Abidjan, Bassam, Grand Lahou and Jacque Ville. The actual output from artisanal salt production in Cote d’Ivoire is unknown but it is assumed to satisfy less than 5% of the edible salt needs of the country. The set of pictures below tell the story of artisanal salt production across the sub-region.

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Artisanal salt production site located at Dzesinu near Ouidah, Benin.

The brine is extracted from the wells and boiled as in the picture below to produce salt.

Artisanal salt production in Dzesinu, Ouidah, Benin

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Artisanal salt production in Jacque Ville Cote d’Ivoire

Artisanal Producers Harvesting Salt from Lac Rose (Pink Lake), Senegal

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Stock at the Largest Artisanal Production site at Lac Rose, Senegal

Texture of Salt produced at Lac Rose, Senegal

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Artisanal Salt Producers in Front of a Community Warehouse at Coyah,

Guinea

Estimated Domestic Demand In this section we give a quick estimate of domestic demand for salt and industrial demand for salt and its derivatives based on signals and leads provided by representatives of the industrial set ups that responded to our informal interviews. The main objective of the survey was to establish the actual total demand for salt per annum in the target countries especially Ghana, Nigeria, Togo, Burkina Faso, Cote D’Ivoire, Niger, Mali, Benin and Cameroon. However, due to the paucity of data, particularly the absence of time series data it is difficult establish any trends and robust forecasts. Consequently, the study identified the main uses of salt and the specification of salt for the various end-uses where feasible. Apart from estimating the household demand for edible salt, attempts were made to provide an insight into the level of consumption of chlor-alkali products in the target countries to enable a decision to be taken on whether or not to venture into the development of a chlor-alkali industry in Ghana and at what capacity.

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Demand for Edible Salt

The statistics from Africa Economic Outlook shows that the population of the West African Sub-region is approximately 322,534,000 with approximately half of the number in Nigeria alone. It is estimated that the daily salt requirement for an average person range between 1100 to 3300 mg/day in a healthy diet for both men and women. Thus the total domestic demand for edible salt in the West African region can be estimated to reach between 117,724.91 and 388,492.23 metric tons per annum.

Table 3: Annual Forecasts of Edible Salts Requirements in West Africa Country Population

(thousands) Annual Edible Salt Requirements (metric tons)

Benin 8,662 10,433.38 Burkina Faso 15,234 18,349.35 Cameroon 19,088 22,991.50 Cape Verde 499 601.05 Chad 10,914 13,145.91 Côte d'Ivoire 20,591 24,801.86 Equatorial Guinea 659 793.77 Gabon 1,448 1,744.12 Gambia 1,660 1,999.47 Ghana 23,351 28,126.28 Guinea 9,833 11,843.85 Guinea Bissau 575 692.59 Liberia 3,793 4,568.67 Mali 12,706 15,304.38 Mauritania 3,215 3,872.47 Niger 14,704 17,710.97 Nigeria 151,212 182,134.85 São Tomé and Principe 160 192.72 Senegal 12,211 14,708.15 Sierra Leone 5,560 6,697.02 Togo 6,459 7,779.87 West Africa 322,534 388,492.23

Industrial Requirement of Salts

This section of the report highlights some of the most significant industrial uses of salt and chlor-alkali products in the sub-region. Nigerian Imports Appendix A details the quantity and variety of salts and chlor alkali products imported into Nigeria which is the biggest economy in the West African sub-region. The table below shows the value of the different types of salt import in billions of Naira. It can thus be said that the market for salt and salt derivatives including pure sodium chloride, with or without anti-caking agents, seawater,

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crude salt, table salt, denatured salt, edible salt and processed salt in Nigeria is approximately US$145.8million. But Omani (2009) estimates that pure salt import into Nigeria is in the region of US$50milion Since importers have indicated that raw salt is delivered at Nigerian ports at between US$32 to US$55 c.i.f. per ton we estimate that the volume of crude salt imported into Nigeria could be anything between 2,650,909 and 4,556,250 metric tons. The caveat is that the value of salt import is not limited to raw salt. The assumption is that Nigeria imports the estimated amount of salt for both domestic and industrial use. If we further assume that the bulk of the salt import is for industrial use in the oil industry for the fabrication of PVC (Poly Vinyl Chloride) used for plastic pipes, containers, etc. then it is possible to forecast that with the right marketing strategy Ghana is able to capture a reasonable proportion of this market.

Table 4: Value of the Salt and Derivatives Imported into Nigeria Value (N) Exchange

Rate Value US$

2001 8,313,896,311 0.008735 72,621,884 2002 6,769,380,484 0.008134 55,062,141 2003 11,091,936,739 0.007305 81,026,598 2004 6,908,302,222 0.007722 53,345,910 2005 8,342,868,072 0.007782 64,924,199 2006 12,636,075,778 0.008104 102,402,758 2007 16,905,868,086 0.008623 145,779,301

Alumina Production in Guinea Estimated Demand for caustic soda by the Alumina Company of Guinea which produces 700,000 tons of alumina per year is 630 thousand metric tons per year. This Friguia Plant located at Fria is currently wholly owned by RUSAL. The representatives of RUSAL in Guinea and the Technical Directorate in the Ministry of Mines in Guinea have laid out elaborate plans to expand alumina production in Guinea by 2015. The estimates are that by 2013 Global Alumina, Alcoa, RUSAL and Rio Tinto will scale up the output of the existing Friguia plant and also start new plants to bring total output of alumina to approximately 3.2 million metric tons of alumina in Guinea. The plans project that total production of alumina will be increased to 7.4 million metric tons by 2015. Indeed the vision of Guinea is to become a major producer of Alumina by the year 2025. It is important to observe that these projections by the technical directorate of the Ministry of Mines and the Major players in the Bauxite industry is currently suffering from the sluggishness of the international financial markets and the political conditions in Guinea. However, given the amount of bauxite deposit in

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the country the estimated production targets could become a reality. In that case the demand for caustic soda in the Guinean alumina industry alone could go as high as 799.2 thousand metric tons per year. The current requirements of the alumina plant in Guinea like the supply of chlor alkali products in the entire region is imported from outside the region. The industry players have indicated that whilst they look favourably on the promotion of products from West Africa, the bottom line for the procurement of all inputs is that which is considered economically sensible. Thus cost effectiveness and prices are the instrumental lead considerations in the input procurement matrix. The sensible thing to do therefore is to plan any future chlor alkali production as by consulting and planning with the intended target beneficiaries as the as their specifications for the level of concentration of caustic so also differs from plant to plant. Uranium Mining in Niger Compagnie Minière d'Akouta (COMINAK) Limited, an underground mine located in Akouta, northern Niger produces approximately 2,500 metric tons of uranium per annum imports 7,000 metric tons of salt annually from Algeria for its operations. Technically, it follows that Société des Mines de l'Aïr (SOMAIR),which operates an open pit mine located in Arlit, northern Niger and produces 2,300 metric tons of uranium per annum will also require approximately 7,000 metric tons of salt per annum. At the current level of production the uranium mines will require approximately 15,000 metric tons per annum. Drilling of Oil Wells Calcium chloride and sodium carboxyl methyl cello lose (CMC-NA) are chemicals that are routinely required in the oil industry to drill wells. CMC-NA is a cellulose derivative obtained by chemically modificaton of the natural cellulose. It is one of the most important water soluble polymers with many advantages that other natural or synthetic glues do not have that is used in drilling. CMC solution has good properties of thickening, adhering, emulsifying, and stabilizing oil wells. It is estimated that approximately 200,000 kg of the chemical required per well. On the other hand approximately 500,000kg of calcium chloride is utilized in oilfield drilling, completion and work-over applications per well. Whilst oil companies well not readily forthcoming with information on the processes and requirements this data suggest that the petro-chemical industry will be a stakeholder in the salt and chlor-alkali industry. Water Treatment According to the Global Water Partnership, the withdrawal level of renewable water resources in West Africa (excluding Cameroon and Chad) is currently at 11 billion m3 per annum; it could increase six-fold between 2000 and 2025 if West Africa maintains its current level of access to drinking water and food security. It is therefore expected to increase from the current 11 billion m3 to more than 65

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billion m3 per year. Given that 17% of this consumption is for domestic uses between 1.87billion m3 of water need purification now and the figure will rise to 11.05 billion m3 per annum. Incidentally all the Water Companies surveyed use imported chlorine for water treatment. It is also apparent that they currently treat water for only a minute fraction of their respective populations.

Forecast of Industrial Salt Requirements The data provided by the different industrial concerns surveyed in this study is rather inadequate to provide a forecast with the least degree of confidence. However, since the demand from industrial users of salt and salt derivatives is the most crucial variable in the decision to make an investment in further expansion of salt production in West Africa we make provide a crude forecast that must be further investigated with major industrial concerns before a new salt work is established. The major assumption in making this forecast is that the chemical industry including the petrochemical industry use sodium and chloride derivatives that are byproducts of the production of caustic soda. Consequently based on the forecasted demand for caustic soda which is derived from the electrolysis of salt, demand for salt by the food processing industry and current demand in the uranium plants we forecast that industrial demand for salt could be around 5,135,000 metric tons. Table 5: Forecast of Industrial Salt Demand Industry Derivative Use Estimated

Quantity (metric tons)

Salt Required

Mining (Alumina) Caustic soda1 2,880,000 4,320,000 Mining (Uranium) Salt 15,000 Water Purification Chlorine2 - Soap and Detergents

Caustic soda 400,000 600,000

Food processing Salt 200,000 Total 5,135,000 The limitation on the forecast for industrial demand is the uptake of chlorine which is the byproduct of the caustic plant. It is important to note that since chlorine cannot the allowed to get into the atmosphere the size of any caustic soda plant and hence the projected salt production will be a function of the

1 Approximately 1.5 short tons of evaporative salt are required to produce a short ton of caustic. A 50-ton per day caustic plant will use approximately 75 short tons of salt per day, or 27,000 tons of salt per year. The type of salt to be used – and corresponding cost – is the second major variable that must be factored into the cost to produce chlorine and caustic using UniChlorTM Technology 2 Chlorine is a by product of the caustic soda production process.

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chlorine usage in the water sector and other chemical industries. However, it is expected that as the natural gas from Nigeria and Oil Fields in Ghana are harnessed the chlorine uptake in the chemical and plastic industry will increase considerably making it possible to increase the scale of caustic soda production and consequently an increase in solar salt production in Ghana.

Combined Domestic and Industrial Demand The domestic and industrial forecast put together shows that approximately 5,523,492 metric tons of salt is required in the West African sub region in the short to immediate run. The projected requirement which is significantly influenced by the demand for caustic soda in the industrial sector is subject to the ability to use the chlorine associated with caustic soda production.

Structure of the Salt Market in West Africa The market for domestic uses of salt in the ECOWAS sub-region is highly segmented. Market segmentation observed in the salt trade is linked to the artisanal nature of salt production in the region as well as the characteristics of salt as an essential ingredient in the food chain. The market structure is a direct function of the production function in the various countries. The artisanal producers of salt sold their output to all manner of distributors and retailers within and outside the country and region of production. Thus producers in Ghana, Senegal and Guinea sell to distributors and retailers in country and to distributors outside their country. On the other hand countries like Cote d’Ivoire, Benin, Nigeria and Niger who produce on a limited scale sell mainly in their own countries but there is also a significant cross-border trade in the border regions of these producers. Senegal in particular has a good network of distributors to the French speaking countries, supplying salt to countries as far as Cameroon, Gabon and Central African Republic. The network of retailers and distributors is widely diffused because there is no restriction on the production and sale of salt which is by all account an essential ingredient in the food chain for both humans and livestock. The same producer sold salt to retailers who provided salt to domestic consumers and those who purchased salt to supply the needs of the livestock industry. Given the structure of the market and the diffused network of distributors governments in the sub-region have focused their intervention at the point of production. These interventions have targeted the iodization of salt. In these respect producers in collaboration with Food and Drug Agencies are working to ensure that all edible salt is iodized. In Nigeria, salt for domestic consumption is also expected to be fortified with vitamin A. The inherent difficulty in ensuring that salt meant for the livestock industry does not end up on the table has prompted Senegal to insists that all salt be iodized at the point of production.

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One way to ensure that salt sold to consumers does not lose its iodine content before being consumed is to package edible salt in small quantities. Thus almost countries in the sub-region have introduced packaging and labelling regulations to the market. Salt for domestic consumption is to be packaged in not more that 1kg sachets. Salt packed for retail to households is also expected to contain 30-50 ppm of iodine. In Senegal imported salt must contain 50-80 ppm of iodine whiles salt meant for export out of that country must contain 80-100 ppm of iodine. As expected salt that is expected to keep longer in transit must have higher iodine content because iodine content reduces with longer exposure to elements of the weather. Consequently, the requirements of the different National Food and Drug Administration will constitute an essential factor in the characterisation of the market for salt in the sub-region. Equally diffused is the segment of the market which is concentrated on the importation of packaged edible salts mainly from Europe. These imports are often in small quantities packaged in designed containers for the table. The importers are numerous and are not effectively covered in the import databases but what is clear that these importers supply the hospitality industry and the sophisticated domestic consumers. The high end of the market is dominated by what may be described as a cartel – a handful of companies that import large quantities of raw salt from around world for processing and packaging for the domestic market. This segment of the market is currently dominated by two companies based in Nigeria namely, Dangote Plc and Royal Salts Limited. Both companies have factories for processing and packaging of salt located in Lagos (Apapa) and Port Harcourt. Conservative estimates show that these companies import approximately 700,000 metric tons of salt to the ports in Nigeria per annum. The companies import raw salt from countries like Brazil, Israel, India, Namibia, Morocco, Tanzania and beyond. The companies have processing facilities that enable them to iodize salt and package them for domestic and industrial users. Their industrial customers include:

Water Purification Enterprises Textile Manufacturing Companies Leather Tanning Companies Glass Manufacturing Enterprises Oil Industry PVC (Poly Vinyl Chloride) Manufacturing Pottery/Glazing Enterprises Pharmaceutical Companies Detergent Manufacturers Food Preservation/Processing Enterprises

The main considerations of these bulk salt importers are the price at which the salt reaches the port and also the consistency of supply. The indications are that

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the cost of salt delivered at the ports (c.i.f.) in Nigeria from the different sources enumerated above range between $35 and $55 per metric ton. The only domestic production facility that operates in this important segment of the market is the Ste Nouvelie Des Saline Du Sine Saloum salt works in Kaolack, Senegal. This company is an export processing company and produces approximately 200,000 metric tons of salt per annum. This factory also produces at an ex-factory of CFA 35,000 (approximately $77.805) per metric ton (fob). In between the artisanal producers and the processing factories in Nigeria and the major salt works in Senegal are approximately 4 medium scale producers in the sub-region namely Panbros Salt, Songor Salt Project Ltd and Ningo Salt Ltd in Ghana and SELSINE salt works in Fatick Senegal each producing about 40,000 metric tons per year. These producers like the others sell to both distributors and retailers within their operation area and also distributors from outside their countries. The segmentation of the market into the high end and low end notwithstanding, a major characteristic of the market is that all suppliers sell to both domestic and industrial users. Thus in order to reduce the incidence of non-iodide salt being delivered to domestic consumers many countries particular those with significant amount of export have adopted the safer option of iodizing all salts produced within their borders. The results of the market study are that the salt market is currently free at one end where distributors search for and import salt from anywhere in the sub-region. This end of the market is satisfied by predominantly artisanal producers who export salt across the sub-region mainly by road despite the fact that some significant amount is exported from Senegal by sea to such countries as Benin, Cameroun, Gabon, Central Africa Republic and Democratic Republic of Congo. The other end of the market is the salt packaging industries that import salt from all over the world for processing, packaging and distribution to domestic and industrial users. This group also produces branded edible salt such as Anapuna salt for large scale distributors such Unilever who intend supply to retailers throughout the sub-region. For the processing and packaging segment of the market their main consideration is the price at which the salt is delivered to the ports of operation and also the consistency of supply. Accordingly, efficient production and competitive pricing are all that is required for Ghana to make an entry in that segment of the market. The challenge at both ends of the market however, is the requirement of the food and drug agencies in the different countries. Incidentally, the national regulatory agencies have been collaborating to harmonise standards with the help of UNICEF making it relatively easier for Ghana to penetrate the market without much difficulty.

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Strengths and Weaknesses of Current Suppliers The current situation in the low end of the market makes identification of major suppliers of salt a difficult task. The producers at Lac Rose which produce a third of the salt in Senegal is a GIE (a producer cooperative) with virtually no restriction on market entry. The Coyah salt producers in Guinea are also a production cooperative with no restriction on entry and exit of producers. Similar outcomes can be observed in all the artisanal facilities in Benin, Cote d’Ivoire, Ghana and Niger. At this end of the market there is very little to show in terms of contracts/agreements between producers and major distributors. Importers/distributors often make their way to the production sites and move around taking invoices from several producers who have stock until they obtain the desired quantities. The stock which is regularly obtained from more than one producer is then loaded onto trucks for transport to their destination. The main elements in the determination of price in this segment of the market are the seasonality, knowledge of the market and customer loyalty. Beyond artisanal producers it is possible to identify the modern salt works in the West Africa sub region as the 4 medium scale producers – 3 in Ghana and 1 in Senegal and one large scale producer in Senegal. These producers supply iodized salt to the domestic market sometimes with specific labels for Unilever which is a major distributor in the ECOWAS region. Thus, the medium to large scale producers regularly package salt for major distributors but the terms of such contracts were considered to critical to the firms’ balance sheet to be disclosed. These producers however, suggest that a critical consideration for the distributors is the continuous and consistent supply. Commercial considerations suggest that the retail market price of the product which is an essential product with an inelastic demand is a key determinant in the supply contracts. Producers must also guarantee that they are capable of satisfying their share of the market without fail all year round. The main weakness of the current diffused markets structure is that distributors and retailer of salt enter and exit the market continuously. Consequently, producers do not receive consistent signal about the market and product development. Thus, the structure of the market has failed to motivate producers to strategise and expand production. Indeed the market structure is the main culprit in re-enforcing the artisanal production in the sub-region. Furthermore, the diffused markets have been re-enforced by government policy of promoting small-scale mining as a strategy for poverty reduction and promotion of employment which is common in the sub-region. In Senegal for example government has indicated that apart from the tourism potential of the Pink Lake (Lac Rose) it will prefer to have the artisanal producers than to introduce modern salt works into the region.

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A combination of policy and market structure have adversely affected the development of modern salt works in almost all the coastal areas where solar salt production is feasible except in the Kaolack region of Senegal. Overall government policy to promote small scale mining as an instrument of poverty reduction has favoured artisanal salt production, with very little to show in terms of commercial arrangements such as binding contracts between producers and distributors. In addition, the nature of commercial agreements of major importers of salt into the sub-region could not be verified. Dangote Plc seems to emphasize the cost of landing raw from Brazil and the guaranteed supply. Royal salt which is the main competitor to Dangote Plc in the salt packaging industry appears to have a strategy of price plus procuring raw salt from a network of sister companies in Namibia, Tanzania and India. The implications are that one company is concerned with processing regardless of the origin of the salt whilst the other company is interested in the development salt works as part as part of its strategy.

The Fiscal Regime The fiscal regime in all the countries included in this study mirrors developments in the ECOWAS customs union which is a multi-stage process, where the member countries first have to align their tariff schedules with each other, following which they eliminate remaining duties on intra-ECOWAS trade. The ECOWAS common external tariff clusters most tariffs in four bands of 0, 5, 10, and 20 percent with raw materials and intermediate products attracting lower tariffs and consumer goods attracting higher tariffs. Thus salt imports into all the countries attract 5% VAT. The product is freely traded because it is not considered a restricted commodity in any of the countries surveyed. In the light of the ECOWAS customs union there is no tariff on salt imported from the ECOWAS sub-region into countries like Niger. However, importers of salt need to produce certificates of origin of the salt before they can be granted zero tariff. In all jurisdictions salt import is subject to an ECOWAS levy of 0.5%.

The Nature of Ports The cost of transporting salt is a critical factor in determining the f.o.b. or c.i.f. price of salt, making location of salt works and salt processing facilities near or inside port facilities a convention. As indicated above the processing facilities in Nigeria are located within the ports at Apapa (Lagos) and Port Harcourt in the River State. Even though the two companies do not have a specialised port the landing of salt is facilitated by the fact that that they are terminal operators in Lagos and tenants of terminal operators in Port Harcourt. The salt processing facilities quick access to port terminals ensure that vessels which come in to discharge salt have a quick turnaround time.

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They organise their own discharge of the salt using own grabs to move the salt onto conveyor belts that take the salt directly into warehouse so as not expose the salt to elements of the weather. In the Port Harcourt area where it rains heavily from April through December, the conveyors are covered to ensure all year round discharge of salt from vessels that bring salt to the port. The break waters of the Port Harcourt port has maximum depth of between 7.5-7.7 meters imposing limitations on vessels whose draft can allow passage into and out of the harbour. Accordingly, 30,000 tonner vessels which bring salt to the factories in Lagos discharge part of the load in Lagos and continue to Port Harcourt with a smaller quantity of load for the factories located in that port. The Nigerian Port Authority has indicated that even though the Port Harcourt facility can take up to 20,000 tonner vessels it working to increase the depth of the sea port to 8.5 metres to enable it handle bigger vessels. As far as port tariffs are concerned the Nigerian Port Authority has a special Tropical West Africa Charges (T.W.A.) for vessels engaged in trade within the West Coast of Africa lying between latitude 15oN and 15oS at 3.56/tonne for dry bulk cargo. Ship Dues (per GRT) in US$ for TWA vessels is computed as $0.62xGRT + 1176$.95xGRT Annual Light Dues. In addition the above the dry bulk cargo vessels will be charged Berth Rent at the rate of $2xLOAxDays, Delivery Charges including Handling charges at N98 per tonne, Documentation & Customs Examination/BL of N1400, VEP & Tally Sheet & TPR of N225 and VAT of 5%. Also in Senegal the Ste Nouvelie Des Saline Du Sine Saloum salt works in Kaolack, has to port facilities and is able to take up salt from it fields directly into vessels for shipment into Europe and beyond. The experience of salt processing companies in Nigeria and that of the Ste Nouvelie Des Saline Du Sine Saloum salt works in Kaolack, Senegal is that Ghana needs a jetty if it want to export salt to countries along the coast particularly Nigeria, Cameroon and further to Central Africa. The study by Omani (2009) has identified 3 possible location of such a facility, namely Lolonyah in the Songhor Lagoon Basin and Keta or its nearby Adina in the Keta Lagoon Basin as ideal location for port operations in terms of proximity to local salt mines and suitability of depth contours offshore. His recommendation to use mini bulk carriers of about 10,000 tons is consistent with the evidence from the ports in Lagos and Port Harcourt that light vessels of up to 20,000 tons are ideal for servicing the two ports.

Conclusions The main conclusions of this survey are that there are diffused salt markets in the sub-region in the area of edible salt and artisanal producers control a significant share of this segment of the market. However, there are also imports from

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different regions of the world to satisfy part of the edible salt market. Ghana will be able to sustain its share in this market if it is able to lower the c.i.f. value of landing salt in the different countries. For instance in Niger and countries in the Sahelian zone Ghana must be able to compete with the salt producing nations on the Mediterranean seaboard such as Algeria and Morocco and Senegal. Transporting salt by road and the quality of the salt remain practical issues that must be tackled to improve upon the c.i.f. value of deliveries to the region. Currently, the c.i.f. value of salt delivered to Niger from African countries range between $19.75 and $4,518.52 per metric ton with Ghana delivering salt to that country at $59.8.

Apart from the artisanal producers there are two major salt processing and packing companies in Nigeria who rely on imported raw salt from around the world. There is also one large scale salt works operating as an export processing company from Senegal. Beyond these we have about 3 medium scale salt producers in Ghana and a medium scale producer in Senegal. The processing and packaging companies are favourably disposed to sourcing their raw salt from Ghana as long as the prices are competitive and supply is guaranteed. It is also apparent that all the major commercial users of salt rely on importers who package raw salt imported from different places across the world. Some of these industrial users like the oil and PVC manufacturers in Nigeria, Unilever and the uranium mines in Niger import salt directly from wherever they can find the product. The industrial users indicated that their uptake decisions are based on cost and quality (purity and moisture content) of the salt they import. It is also important to observe that with estimated import of between 2,650,909 and 4,556,250 metric tons of salt into Nigeria, that country will remain the most important market to Ghana until the expansion of alumina production in Guinea becomes a reality. At current production cost of approximately US$35 in Ghana maritime transport cost of between US$5 and US$10 is required for Ghana to be competitive in the Nigerian market as that country currently imports salt at an average price of US$45. All industrial users of chlor alkali products currently import these products directly from Europe and Asia. Thus the market potential for the production of caustic soda and other chlor alkali products remain very good subject to the capability for the uptake of chlorine, a by-product of caustic soda production which cannot be discharged into the atmosphere. Beyond the salt processing and packaging plants, the industrial users of salt and chlor alkali products have expressly identified competitive pricing and guaranteed supply as the main determinants in their procurement plan. Without disclosing the nature of their current contracts and supply arrangements, the industrial concerns have indicated that if a well thought out production facility emerges in Ghana and is able to deliver on price, quality and guaranteed supply they will

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patronise the products. Indeed some have indicated their willingness to be part of the planning and development of any production facilities to ensure that their specific requirements are part of the scheme from the development phase.

Recommendation Based on the evidence that the bulk of edible salt is traded across the region without discrimination or tariff barriers Ghana can increase its market share by extensive market research and efficiency pricing. This strategy may start with countries that already import the bulk of its salt from Ghana such as Niger. The diffused market structure has encouraged both salt producers and non-producers to import and export salt. Consequently to gain market access it is recommended that Ghana must work aggressively on packaging and branding of salt for different purposes so it can improve on access of all the different segment of the salt and chlor-alkali market.

To improve on the quality of salt production it is imported that interventions that will regulate the quality of product by artisanal producers must be tackled. An alternative and more feasible strategy will be to buy out artisanal producers but this will require providing the displaced producers with alternative livelihood activities. The challenge with this option is that the numbers are relatively high and very little alternative activities appear to thrive in the salt producing regions.

To take advantage of the vast industrial market which is currently dominated by imports from outside the region Ghana must engage the salt packaging companies and major industrial stakeholders to secure off take agreements with the industrial users of chlor-alkali products as a basis for establishing a modern salt works to provides the salt needs of the sub-region. The usage of salt in the chemical industry is expected to grow, on the back of the revival of the economies in the sub-region and global economy. With respect to the industrial market, the Nigerian market is the recommended target market for bulk salt export from Ghana. Consequently, Ghana must work to keep transport cost within reasonable limits to remain competitive in that market.