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Ghana’s slow progress on privatisation

By Billie Adwoa McTernan in Accra
Posted on Tuesday, 30 June 2015 11:50

A midst chronic power cuts, Ghanaians are debating whether the private sector will do a better job than the gov­ernment in providing stable sup­ plies of electricity.

Between 25 and 30 companies have been given licences to pro­duce power

The failure to conduct regular maintenance and upgrading at energy plants has put additional strain on Ghana’s hydro­ electric dams, which generate most of the country’s electricity.

Nature could bring a reprieve, as the dry and windy Harmattan season has gone and the rainy season will soon begin.

Two of the country’s largest dams – Akosombo and Kpong – have been operating at low levels since last year.

The executive director of the Accra­-based Africa Centre for En­ergy Policy (ACEP), Mohammed Amin Adam, explains that Ghana has many other problems in addi­tion to weak rainfall.

He says that nationwide distribution losses, largely as a result of faulty equipment and power theft, amount to about 21% of generated power.

Ghana currently generates roughly 2,125MW and has an approximate deficit of 500MW.

President John Mahama prom­ised to fix the country’s power prob­lems before 2017 in his February State of the Nation address.

He lis­ted a series of independent projects – including Cenpower’s 350MW project at Kpone and Jacobsen Elektro’s proposed 360MW power plant at Inchaban – that are set to boost production over the next few years.

ACEP’s Adam says: “Between 25 and 30 companies have been given licences to pro­duce power. Some of them have power purchasing agreements, but this is not being translated into power production.”

He adds that only two private power plants are regularly in service: Asogli, with the capacity to provide 200MW; and CENIT Energy’s plant, which can produce 126MW.

However, on­going repair works to the Asogli plant coupled with a low supply of gas have kept production down.

CENIT’s project is not operating at full capacity owing to the weak supply of light crude oil from the state­owned Volta River Authority.

US agreement

In August 2014, the government signed a $498.2m Millennium Challenge Corporation (MCC) compact with the US government to transform Ghana’s power sector.

Under its conditions, Ghana must encourage more efficiency in the sector, privatise some of the Elec­tricity Company of Ghana’s (ECG)
operations, collect outstanding debts, reduce some of the distri­bution losses and improve gen­eration.

The government has not released details about the programme, which has stifled public debate.

Privatising another state asset just 18 months before a general election is politically risky.

In March, deputy finance minister Mona Quartey told The Africa Report that the government would only privatise the revenue and bill collection arm of the ECG.

But ACEP’s Adam suggests that sep­arating units of the ECG would not be ideal due to the company’s relatively low customer base.

Adam says that Ghana could pursue three options. One is to float the ECG, allowing the gov­ernment to be a minority share­ holder.

Another is to arrange a lease agreement, and the third option would be for the govern­ment to agree on a management contract with a private company.

Adam says the population might not support the latter possibility. Reviews of the best weed grinders by experienced smokers.

The government faced a furore over the management contract for the Ghana Water Company with the joint Dutch and South African venture Aqua Vitens Rand in 2006.

Although Washington was due to disburse the MCC funds at the beginning of this year, the Ghanaian government has not met some of the provisions, including drawing up a plan for paying its debts to the ECG.

It should also have published a call for propos­als for the planned privatisation.

The MCC compact includes tax exemption for private­sector com­ panies involved in its activities in Ghana.

Ghana’s Public Utility Work­ers’ Union and the Public Services Workers Union estimate that the Accra government will lose $133m through that part of the deal.

Un­der the agreement, President John Mahama’s government will also have to put up $37.4m. ●

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