Government’s inability to satisfy all the needed conditionalities demanded by the Millennium Challenge Corporation (MCC) has delayed the release of the $498.2 million cash by six months. The Vice President of the Department of Compact Operations at the MCC, Kamran Khan indicated that although government is yet to satisfy all the conditionalities, significant progress has been made.
‘There are certain things that need to be done before we can release the money,’ he said. According to him, the MCC has estimated a certain timeline for the conditions to be met ‘but as the process moved forward, people discovered that it was going to take a bit longer to do those things right.’
Mr. Khan said his outfit would rather have ‘those things done right than to just check off and say their done and start moving… if they are not done we will wait.’ Ghana is expected to start receiving part of the $498.2 million power compact in December this year.
This is after earlier indications that the money would be disbursed in mid 2015. The Ghana Power Compact between the MCC and the government of Ghana was signed in August 2014.
This is expected to lay the groundwork to increase the operational and financial sustainability of Ghana’s power sector.
Ghana has been hit by a power crisis that is running into its third year leading to the collapse of several businesses and the resultant dismissal of thousands of workers.
There is a substantial and growing gap between demand and available supply, plus an appropriate reserve margin. The 5-year compact will also seek to reduce poverty and open the Ghanaian energy market to private investment by supporting the transformation of Ghana’s power sector.
According to MCC, the private sector stakeholder group that was consulted during the development of the Compact identified three key constraints to investments that the compact seeks to address.
The first constraint is that the Electricity Company of Ghana (ECG) is not considered as a credible off taker.
The government and MCC are considering pragmatic ways of dealing with this issue since the signing of the compact. But Kamran Khan denied the MCC is asking for the privatization of ECG rather he says all parties have agreed on a concession for private sector participation.
‘The option that has been selected and communicated to us is a concession. It is absolutely different from privatization.
Concession is a contract that government signs with a private company, the private company comes in and makes some investments in the operation of the entity (ECG).’
‘It comes in under the contract that is written very specifically taken into account the interest and concerns of all facets of the society.
So that when the entity is operating under this concession it has certain operational standards and there are penalties if it does not meet those standards,’ he stressed.
Provision of reliable gas supply and the development of a clear, robust independent power producer framework are the other two constraints.
Kamran Khan said he met with President John Mahama and other key minister and progress is being made in achieving some of the conditions to be met before the release of some of Funds.
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