The revelation that government has, since 2017, paid the Electricity Company of Ghana over GHc8 billion in inherited debt and ongoing bills since then, is most welcome news. The seemingly perennial indebtedness of government to the primary electricity distributor has been identified as a major cause of the power shortages suffered from time to time by industry and households alike. Hopefully, now that the debt has been paid down – government actually had a GHc 500 million credit balance with ECG by the end of last year – debt will not be allowed to accumulate again going forward.
But the good news has also put ECG’s situation back on the front burner of national attention again, for the first time since the concession that created Power Distribution Services was terminated in fiasco late last year.
At that time government had promised to quickly repeat the process that had created the ill-fated concession, although this time using a much faster timeline. Since then though, nothing has been heard about the process, ostensibly because of the crisis brought about by the coronavirus outbreak.
This is a good thing. This newspaper at the time of the termination of the PDS concession had called for major changes to the process through which private sector participation would happen and also had called for a far longer, and cautious timeline for executing whatever process was to be adopted.
The stretching out of the timeline has been forced upon us by the COVID 19 outbreak. What needs to still happen though is a major change in the process for introducing private sector participation.
Having learnt invaluable, clear lessons from the PDS concession fiasco, we recommend that whatever local shareholding is retained, should be fully backed by cash. This means potential foreign equity and technical partners should not be called upon to finance freely carried equity interest by their Ghanaian counterparts.
It was the attempt to do this that led to the PDS disaster in the first place. Government’s insistence on majority shareholding by Ghanaian investors who had the right political connections but not the requisite investment capital drove away the genuine potential foreign partners, leaving only those willing to participate in sharp practices to fund the needed new investment into electricity distribution. The result was Meralco, which was willing to cooperate with their Ghanaian partners to use customers’ bill payments to finance the requisite new investment rather than their own equity capital, and all this without any insurance guarantee to protect the State’s billions of cedis in ECG assets.
This time around therefore, local participation has to be fully paid up and to do this government simply needs to sell ECG shares through the Ghana Stock Exchange. If MTN Ghana could raise over GHc1 billion in equity finance through the stockmarket in 2018, there should be little difficulty in raising less than half of that on behalf of ECG.
This in turn would attract the best quality foreign counterpart investors and enable the wider private participation programme for Ghana’s power sector – for which Ghana has already taken considerable money from the United States government, with more to come – to be successfully concluded.
The only losers from this process would be local investors who were hoping to use their political connections as a substitute for investment capital.
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