The sector’s SOEs recorded losses of GH¢3.7billion in 2018, GH¢2.9billion in 2019 and GH¢2.5billion in 2020 – with Electricity Company of Ghana (ECG), Tema Oil Refinery, Valco and Northern Electricity Distribution Company among the biggest losers within the period. With the exception of ECG, the two recorded negative profits throughout, according to a new report by the Africa Centre for Energy Policy (ACEP).
Bui Power and Ghana National Gas Company are the only SOEs that made profit throughout the three year-period. Ghana National Petroleum Corporation and Ghana Grid Company Limited meanwhile recorded losses in one out of the three years.
The Volta River Authority made profit in one of the three years – same as Bulk Oil Storage and Transportation Company, both returning to profit only in 2020 said the report titled ‘The state of the energy and extractive sectors of Ghana: critical reforms required for sustainable economic recovery’.
“The power sector under-recoveries undermine the country’s economic development,” ACEP’s Executive Director, Benjamin Boakye, said at an event in Accra to unveil the report.
At best, the report said, the power sector remains unsustainable and a major threat to economic growth; noting that urgent steps are required to stop the debt accumulation and ensure settlement of existing debt more sustainably.
In 2020 and 2021 alone, Mr. Boakye said, government’s settlement for energy sector under-recoveries was more than GH¢14billion – GH¢6.8billion in 2020 and GH¢7.2billion in 2021, a situation that he stressed must not be allowed to continue.
The inability to control under-recoveries, he explains, also undermines objective of the Energy Sector Levy Act (ESLA) – a special purpose vehicle that issues long-term bonds to resolve the sector’s indebtedness.
“Currently, levies paid under ESLA barely settle coupon payments, transaction and administrative costs. Outstanding bonds to be settled at maturity amounts to GH¢8.7billion,” he added.
Restructuring the energy and extractive sectors, the report advocated, is therefore urgent for the transformation and resolution of the current dire economic context.
“Though ACEP does not see resolution of the sectors’ challenges as a silver-bullet for addressing all governance challenges in the country, it can be argued that no solution is sustainable without addressing the issues – high fuel cost, decisions on gas imports, investment attraction in the upstream oil sector, energy sector debt accumulation, institutional inefficiency and deepening public participation in businesses with constrained economic promise.
“Addressing the challenges could free resources for development and realign government priorities toward growth. It remains injurious for billions of debts to be created in the energy sector, whose value exceeds direct investment in infrastructure. For example, the US$1.2billion spent to pay for under-recoveries in 2021 in the power sector alone could have been useful for building roads and other critical infrastructure,” it recommended.
It further said management and functions of the state’s energy sector institutions require urgent review to reduce government’s exposure to losses.
“The State Interests and Governance Authority (SIGA) must accelerate its review of the SOEs performance and determine which of them require divestiture, particularly those competing with the private sector in areas where regulation can achieve the same result.
“SIGA must immediately reform appointment, recruitment and other corporate governance practices to comply with acceptable corporate standards,” it further stated.