(first published in the Business and Financial Times on February 23, 2015)
The 17th
February 2015 edition of the Business and Financial Times carried a long front
page feature/opinion article written by Basiru Adam titled “The Headache called
ECG” which purported to analyze the problems of the Electricity Company of
Ghana (ECG) and its contribution to the current electricity supply crisis. It
is however clear that the main purpose of the article is to justify the privatization of the ECG. The privatization (under the guise of restructuring) is the centerpiece of an
energy sector project under the 2nd Millennium Challenge Compact
between Ghana and the USA for which the USA is providing a $498 million grant.
Unfortunately
the article suffers from various weaknesses -a false premise worsened by factual
errors, strategic silences and omissions. These flaws seem driven by the
author’s hurry to arrive at a conclusion justifying the government’s decision
to privatize ECG. He ends up misleading readers about the complex of factors
which account for the current electricity mess which is ruining businesses and
lives. As a result the article’s hailing of the MCA project as offering a
“turnaround” stands on very weak foundations.
The ECG
is one of the least loved public companies in Ghana and not only because it has
its share of the operational and managerial shortcomings that afflict the
public sector. Critically it is the frontline contact between most Ghanaians
and the country’s electricity industry and is therefore the target of public
frustration about the problems of electricity supply. Many of us have stories
of negative experiences with the ECG and can relate to the hassles faced by the
real or fictional woman on a pre-paid meter in Mr. Basiru Adam’s article.
Equally well known are the losses suffered by the ECG from unpaid/uncollected
revenue and illegal connections. The article correctly points out the knock on
effects of ECG’s revenue problems on power generators such as VRA and the
independent power producer (IPP) Sunon Asogli.
Despite
these problems it is patently false to claim, as Mr Basiru Adam does, that the
ECG is “ the problem with power supply in Ghana” , the headache “that needs to
be confronted head-on if dumsor-dumsor
is to be a thing of the past” and the privatizing of which “will give us
uninterrupted power supply”. Resolving
the ECG’s problems and making it more efficient will contribute to improving
the quality of electricity supply but will not fundamentally resolve the many
other problems which have contributed to the present crisis. In its
determination to intensify “the headache called ECG” Basiru Adams’ article
fails to advert to these factors. It also fails to address how some of these
factors have created a big headache for ECG which it is passing on to us.
The article
is completely silent on the most important factor in the current energy crisis
– shortfall in the generation of power. The details of the generation shortfall
and its causes were laid out by the Minister of Power, Dr. Kwabena Donkor when
he met the press on 2nd February 2015. According to him the
generation shortfall had “led to the supply inadequacies leading to the current
load shedding that we are all experiencing”.
In the week of his press conference Dr Donkor estimated demand at 2,109
MW compared with the week’s peak generation capacity 1,494 MW.
The
article’s “blame it all on ECG” approach combines silence about the primacy of
the generation shortfall as the reason
for current crisis with implying that the debts ECG owes to VRA and Sunon
Asogli are the main reasons for their generation problems and the reluctance of
IPPs to enter the market. True the ECG is indebted to VRA and Asogli but more
interestingly who is indebted to the ECG thereby undermining its ability to pay
for power supplies? The Ghana government and public institutions are ECG’s
biggest debtors.
40% of ECG’s monthly bills go to the Government of Ghana.
According to a statement put out jointly by the workers of ECG, VRA and GRIDCO
in January this year the total Government indebtedness to ECG
was GHC1, 247,597,280.51 (i.e. just under GHC1.25 billion or US$375m) as at the
end of October 2014. This constituted more than 62% of debts owed to ECG. This debt, accumulated by successive
governments which carries no interest and has been devalued by inflation, is still worth more than the $365m net value
of the MCC grant once we deduct the $133.89m tax waiver for imports and foreign
firms under the Agreement from the $498m nominal value of the American grant.
In
December last year Energy Minister, Emmanuel Armah-Kofi Buah publicly admitted
the government’s indebtedness to ECG. More significantly he confessed that no
business entity could live for long with that amount of debt owed to it by
customers. In other words, the default
of the government and public institutions has been a major factor in the
decline and crisis of ECG and its inability to pay its debts and to invest in
maintenance and replacement of equipment.
So what
are we to make of the lamentations of Ministers and other politicians about
ECG’s finances and concerns about its possible collapse? Hypocrisy and double
standards would be a charitable description. Having undermined the ECG the
government (with the support of the NPP in Parliament) now turns round to use its
difficulties as justification for privatizing it under the Ghana MCA Energy
project.
A
condition for the MCA grant is that debts due to the ECG are recovered so as to
make it attractive for a private operator. The government has agreed a plan for
clearing the debts. So perversely while government will not pay its bills to
keep ECG alive it will urgently do so to prepare it for privatisation! Even
more bizarrely after years of policies and practices that have weakened not
only ECG but also the VRA it will ensure the profits of the private firms who
will take ECG’s assets and the IPPs who will sell power through ECG!
The signing
of the Compact was the high profile moment of President Mahama’s participation
in the August 2014 Africa-USA Summit in Washington. Sadly the government is
doing its best to arrive at the implementation of the Compact by stealth with
the manipulation of public opinion a key tool. There are credible rumours that
private operators are being lined up for various roles in the private execution
of ECG’s roles. Are we heading for the usual scenario where privatisation hands
the cash cow to foreign firms while Ghanaian cronies are guaranteed crumbs from
the high table?
Parliament
has contributed to the democratic deficit in the Executive’s handling of the
MCA Compact II project rushing through approval and barely evaluating it. The
process by which the Compact Agreement came before the House is worrying. The
Presidency sent the Agreement to the Speaker on the 16th July asking for it to
be approved by the 18th. On the 17th July the Finance Committee met and
produced a flimsy report recommending approval of the Compact Agreement. On the
18th of July 2014, two days after the government submitted the
Agreement to Parliament, the legislature approved the Compact grant.
The approval
process was without a meaningful debate of a complex project, prepared over a
number of years with far reaching policy reform implications for the public and
energy sectors. Shockingly the most lively exchanges in the House was over the
attempt by NDC MP Alhaji Sorogho to stop NPP MP Mr. Annoh-Dompreh paying
tribute to ex-President Kufuor for initiating relations with the MCC.
This
speedy approval of the Compact involved another instance of what has become a
worryingly frequent practice in Parliament - the waiver of the Standing Order
that requires that at least 48 hours elapse between the date on which notice of
a Motion is given and the date on which it is moved. This approach prevents
close examination of issues, thereby undermining Parliament’s oversight and
representative function.
Clearly
both the Executive and Legislature treated legislative approval of the Compact
as merely part of the preparatory steps for President Mahama’s visit to
Washington rather than a serious democratic exercise. This enabled him to face
the media flashbulbs in Washington fully garbed with a democratic mandate to
sign the Compact. If the same type of approval had taken place in Zimbabwe in
respect of a contract with China his American hosts would have denounced it as
a farce.
The
perfunctory approval may have led to a serious blunder in the Executive’s
presentation and Parliament’s consideration of a separate request from MIDA to
waive taxes (import duties on inputs, profit taxes on foreign firms, etc.) connected
with the Project. The tax waiver worth USS133.89 amounts to 25% of the face
value of the $498m of the MCC grant. The MIDA request was part of the material
Government Memorandum to Parliament but its approval was not mentioned as part
of the action the Executive required from Parliament. There is no reference to
it in the Finance Committee Report, the Order Paper for the 18th
July or the Hansard Report of the approval of the Second Compact. Perhaps a
$133.89m tax waiver is too small a detail to worry about in respect of for a
conditionality laden grant from the USA?
That
reforms are needed in the energy sector, including improving the efficiency of
ECG, is beyond question. Is the privatization of ECG one of the answers? I do
not think so. I have read a lot of the Compact II documents and there are many
reasons for doubt and worry which space does not allow me to elaborate. Suffice to say we have been down this road
before most notably in the case of the Ghana Water Company and the concession
agreement with AVRL which ended badly.
Government and its foreign partners are privately making claims of
successful example in other developing countries and flying journalists around
to come and tell the stories. The official narrative can however be challenged.
In
January the Public Utility Workers Union (PUWU) and the Public Services Workers
Union (PSWU) which cover the workers of ECG, VRA and GRIDCO put out a critique
of the MCA project, including the planned privatisation of ECG and offered
their alternative for dealing with the problems of the ECG. This position has
been backed by the TUC and a number of other organizations. The workers
intervention raises many important issues and underscores the need for more
public information and discussion about the assumptions, justifications and
implications of the MCA Energy project and its many conditionalities.
Even as
Mr. Basiru Adam’s article sits very well within the preference of our
Governments for obfuscation rather than openness and engagement with citizens
on a far reaching policy we should welcome it as a trigger for a debate. I hope
the B&FT publishes this rejoinder as part of widening the debate.
(author may be reached at yaograham@yahoo.com)
(author may be reached at yaograham@yahoo.com)
