Energy: World Bank unhappy
Demands swift reforms
to improve efficiency
By Isaac Aidoo
The World Bank has decried the huge losses in Ghana’s power sector which it says is affecting critical sectors of the country’s economy.
The Bank has therefore called for swift reforms to bring about efficiency and guarantee uninterrupted electricity supply especially to industry.
“We expect Ghana to implement reforms to improve efficiency in the various sectors; when we take energy we expect much more efficient production of electricity; we expect much more efficient distribution of electricity,” World Bank Country Director, Mr Henry Kerali said.
He described as worrying the 30 per cent losses made by the Electricity Company of Ghana (ECG), “which losses are both technical and commercial.”
According to experts on power, 1 per cent loss in distributional losses cost Ghana about $8.5 million, meaning then that the 32 per cent losses recorded by ECG in 2015 worked up to $272million.
Apart from distributional losses, the company is saddled with debts owed largely by state institutions. The result is that ECG is indebted to its power suppliers.
Concerns are also rife over gross inefficiency in the operations of the ECG as some staff connive with customers in carrying out illegal connections.
The World Bank’s push for reforms in the country’s power sector comes on the back of its extensive support to Ghana in the form credit guarantees to provide the space for investment in the sector.
The Bank recently agreed to provide up to $700milion to guarantee the partial payment of gas from the Sankofa Gye-nyame field should the country default.
Mr Kerali promised increased support for Ghana and the ECG to reduce the losses of ECG.
“We will work with the ECG, we will work with the government to try and reduce those losses and make sure that much of the energy that is produced ends up in powering our homes and industries,” he stated.
Last year, Ghana’s $1billion sovereign bond issued with a 15 year maturity was partially guaranteed by World Bank Group’s International Development Association (IDA) to the tune of $400 million.
Some economists and analysts have however raised concerns against the development, pointing out that it only serves to encourage government to borrow more, thereby deepening Ghana’s debt crisis.
But the World Bank maintained that the guarantee from the bank “is a timely intervention towards the country’s economic recovery.”
The Bank, he explained has a fixed standard rate regardless of the strength of one’s economy so in times of difficulties when the bank is needed by countries like Ghana.
The Country Director said “when an economy is struggling, this is the time that the World Bank Group comes in as a partner because countries like Ghana will find it much more difficult to access funds from the capital market.”
The issue of power supply to industry has engaged the attention of the Association of Ghana Industries (AGI) among other industrial concerns.
The AGI estimates that for the past two to three years, over 96 per cent of businesses in Ghana have found the cost of electricity unduly high and its supply woefully inadequate.
Chief Executive Officers of organisations captured in AGI’s report said high cost of electricity and inadequate power supply were two topmost challenges that bedeviled their operations in the last quarter of 2015.
These had a scathing effect on the operations of businesses across the length and breadth of the country.
Business Finder however found that challenges with power supply run throughout all four quarters of the year followed closely by exchange rate volatility, multiplicity of taxes and poor access to credit.
The report further revealed that small and medium sized businesses were affected first by high cost of electricity and secondly poor supply of power.
Head of Policy Unit at the Africa Centre for Energy Policy, Dr Ishmael Ackah cautioned that “If ECG is not reformed, what it means is that it will threaten the power sector because they are the main off taker in southern Ghana.”