The Africa Centre for Energy Policy (ACEP) has urged government to focus on investment attraction in Ghana’s upstream petroleum sector to support its development agenda.
According to the energy think tank, there were non-performing contracts which should be reviewed as a matter of urgency to get the contractors to be either active or vacate the blocks so they could be re-awarded to serious companies.
A recent statement issued in Accra signed by Benjamin Boakye, Deputy Executive Director of ACEP, said government should invest in priority areas to facilitate the achievement of the objectives of the PRMA as stated in Section 21(2).
“ACEP believes that should the government respond positively to the concerns raised and heed to recommendations made, Ghana’s power and petroleum sectors will support the country’s sustainable development agenda beyond what the country has already experienced.”
It revealed that the Ministries of Agriculture, Education, Health, Roads and Highways, and Railways Development should publish the list of projects to benefit from the ABFA to allow civil society to track the projects.
“This will improve transparency and efficiency in ABFA utilization.”
ACEP further recommended that the government should ensure project continuity.
“Funds allocated to irrigation infrastructure should prioritize uncompleted irrigation projects that the previous government began. This will ensure that projects are completed on time to cut down on cost overruns and to serve our farming communities. Government must also ensure that monies allocated and disbursed can easily be tracked by civil society groups to assess impact. We further recommend that the government reviews existing road contracts and see to the completion of existing road infrastructure projects initiated by the previous government,” it noted, adding that the government, in reviewing the GIIF law, should abolish allocation of portions of the ABFA to the GIIF and review Section 21(4) of the PRMA to that effect.
It said the power sector priorities were directly linked to the growth of the Ghanaian economy.
“To that extent, ACEP was eagerly awaiting clear articulation of the urgent matters required to manage the power sector in a way that positively impacts on the health of the economy. The budget shows in some detail, how government intends to clean up the ailing power sector to ensure reliable and affordable power supply in a way that significantly deviates from existing arrangements, which ACEP believes are weak.”
Notwithstanding these, it said there were also some visible gaps which the budget should have captured.
Energy sector debt restructuring
“The current government is committed to continue the efforts of the previous government in restructuring the debt of the power sector. What is novel about the proposed arrangements is the raising of bonds to write off the debt of the utilities and accelerate the process of ensuring a clean balance sheet of the utilities on the back of the Energy Sector Levies Act (ESLA). The use of the ESLA to pay GHS787.03 million of the debt of the utilities in 2016 is commendable. However, the fact that VRA still struggles to raise its own letters of credit is an indication that a new approach to dealing with the debts is important.”
It said the Minister of Finance announced 50 percent reduction of levies on electricity; a reduction of National Electrification Levy from 5 percent to 3 percent and Public Lighting Levy from 5 percent to 2 percent.
“This is in addition to budgeted lifeline subsidy of GHS83.8 million. This will provide some relief for consumers of electricity.”
It noted that it was disappointed that the 17.5 percent VAT on industrial consumers was not removed.
“This could have freed up some cash flow for businesses to invest in expansion and improve production. In fact, the VAT on industrial consumers is another nuisance tax, because government eventually reimburses VAT to industry through the sale of their output. Since this has a neutralizing effect, it only makes sense for government to remove the 17.5 percent VAT on electricity to free up capital for investment. Otherwise, this becomes a lazy way of frontloading government revenue without considering its impact on the health of businesses.”
By Samuel Boadi