Union leaders at the hall of the Ghana Trades Union Congress (TUC) are keeping their fingers crossed about the next move by government on the proposed privatisation of the Electricity Company of Ghana (ECG), under the second Millennium Challenge Corporation (MCC) support for the energy sector.
Although the compact, which was signed in August 2014, seeks to also introduce independent power producers and private distributors in electricity supply, the privatisation of the ECG has taken centre stage in the MCC discourse.
President Nana Addo Dankwa Akufo-Addo assured workers of the ECG during the May Day celebrations that they would not be laid off under the MCC compact and said government was taking a second look at the compact.
He said government had amended the terms of the concession agreement to include a requirement that Ghanaians own at least 51 per cent of the concession and that there should be no lay-offs because of the concession and the term of the concession would be reduced from 25 to 20 years.
Following the pronouncement, the sector union, the Public Utilities Workers Union (PUWU), called on the President to honour his word and initiate the process to dialogue with key stakeholders, namely, labour, the ECG and the Millennium Development Authority (MiDA) to iron out bottlenecks hampering the implementation of the Compact II.
Established by an Act of Parliament, (Act 702, 709 & 897 as amended), the MiDA is mandated to oversee, manage and implement the programmes under the Millennium Challenge Account (MCA) for poverty reduction through economic growth as set out in each agreement between the government of Ghana and the MCC acting for and on behalf of the government of the United States of America.
The Ghana Power Compact will directly support the energy sector’s strategic objectives to achieve power supply sufficiency, including exports to neighbouring countries and also supply power for new oil and gas based industries.
Various programmes and projects to be implemented include ECG and NEDCo Financial and Operational Turnaround Projects, Regulatory Strengthening and Capacity Building Project, Access Project and Power Generation Sector Improvement Project, etc.
The MCC will invest up to US$498.2 million to transform Ghana’s power sector and stimulate private investment.
The five-year compact is said to be the largest US government-funded transaction under former United States President Barrack Obama’s Power Africa initiative.
As part of government’s commitment, it has pledged to invest at least US$37.4 million of its own money in the initiative to bring the compact’s total investment to US$535.6 million.
Led by the PUWU, the TUC estimates that MCC for the energy sector will occasion a loss of about US$133 million to the state as a result of tax exemptions that will be offered to private sector participants under the MCC programme.
It earlier suggested that government and the MCC should adopt a phase approach for privatising ECG. They said the various reform interventions initiated by the ECG should be allowed to become fully operational and assess their impact on the company’s efficiency and profitability.
The union has often maintained that the proposed approach under the compact to resolve the challenges facing the power sector does not inure to the country’s interest and that the issue of capital in the power sub-sector could not be fully be addressed by the MCC inflows.
To them, the fundamental problem in Ghana’s energy sector is a shortfall in generation and that should be tackled as a matter of urgency.
Focusing on ECG
The PUWU argues that the main difficulty with power and ECG is the government’s failure to pay its bills, which is undermining the ECG’s capacity to support the country’s economic development.
For the first quarter of this year, the Ministries, Departments and Agencies (MDAs) debts totalled GH¢226,967,736.08, and of this debt for 2017, government has paid GH¢18,133,575.17.
The union maintains that if the challenge of power supply is not first addressed, the much touted PSP will only bring about increased tariffs and accumulation of profits for the private operator whose ultimate objective is not the betterment of the national economy and the Ghanaian society.
The MCC in a previous interview admitted that the support to the energy sector has a tax relief element but explained that such reliefs are synonymous with all donor funded initiatives, including the compact.
Its Resident Country Director, Ms Deidra Fair James, explained that the corporation had given out some US$9 billion as MCC support to different countries worldwide and each of those compacts included tax exemptions and reliefs.
She said the MCC was oriented such that partner governments were responsible for developing and implementing the compact.
She said the compact did not only seek to support but there was funding in the compact to improve the systems, such as enterprise resource systems, billing, customer management systems and upgrading infrastructure in order to help with its drive to reduce commercial, technical and collection loses.
Power challenges and ECG’s attempt
The country in 2015 experienced its worst load shedding as a result of a generation deficit of about 450 megawatts.
As of December 2014, the ECG owed Volta River Authority (VRA) about GH₵935 million, GRIDCo about GH₵200 million and Sunon-Asogli about GH¢400 million.
Consequently, it began the process to install pre-payment metering systems to all MDAs as part of efforts to address the problem of huge indebtedness of these government institutions.
It also initiated steps to retrieve debts owed it by organisations and individuals as part of what it termed a special mobilisation exercise is to achieve maximum results.
Some civil society organisations (CSOs) have argued that rural electrification was a loss-making component, which made ECG a manager of a mixed profitability grid of both the viable and non-viable customers.
Therefore, the MCC compact proposal to hive off Accra and Tema to a private operator would lead to a deceleration of the rural electrification programme and only increase the speed of rural-urban migration which was already a major challenge confronting the country.
The CSOs maintain that wherever privatisation of PSP has been carried out in the energy sector, tariffs have ultimately gone high.