Slow progress on privatisation
The government is relying on private power projects and help from the United States to turn around the electricity sector before elections in December 2016
Amidst chronic power cuts, Ghanaians are debating whether the private sector will do a better job than the government in providing stable supplies of electricity. The failure to conduct regular maintenance and upgrading at energy plants has put additional strain on ghana’s hydroelectric 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 promisedtofix thecountry’s powerproblems before 2017 in his February State of the Nation address. He listed aseries of independent projects – including Cenpower’s 350MW project at Kpone and Jacobsen Elektro’s proposed 360Mwpower 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, on- going 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 state-owned Volta River Authority.
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 shareholder. 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. 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 private-sector companies 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.
The Akosombo dam, with a capacity for 1,020MW, has been operating at low levels because of poor rainfall