Adnan Adams Mohammed
The Electricity Company of Ghana (ECG) has been an albatross on the neck of all successive governments with its growing inefficiencies and unsustainable management practices.
According to the Company’s audited financial statement for the year 2023, its total debts and liabilities stood at GH¢47.2 billion with net loss of GH¢5.96 billion.
A new twist to ECG’s woes is that, a forensic audit by PricewaterhouseCoopers (PwC) has uncovered GH¢ 303.48 million in unexplained “tax offsets,” raising serious questions about financial transparency and revenue allocation within the power sector.
Also, the 2023 Auditor General’s report reveals a discrepancy in revenue collection to a tune of GH₵490 million in a period of three month, between October and December 2023. The discrepancy involves both tariff and non-tariff revenue.
According to a report shared by the Public Utility Regulatory Commission (PURC), the variance was identified between the regional bank accounts and ECG’s head office accounts. The audit report explained that: “Between October and December 2023, ECG reported revenue of GH₵3.38 billion. However, based on information from the head office bank accounts analysed, the recorded revenue was GH₵3.87 billion.”
Further investigations revealed that the unaccounted funds resulted from the transfer of all funds from district and regional accounts to the 14 head office accounts at the end of each month. This transfer process led to the GH₵490 million discrepancy between the figures reported by ECG and those found in the audit analysis.
All these have ignited public interest in the ECG management and inefficiencies. With the newly inaugurated President Manama administration indicating its readiness to reconsider involving private participation in the management of the Electricity Company of Ghana (ECG), many stakeholders have ignited opposing debates.
In a meeting with Independent Power Producers (IPPs) to address longstanding challenges in Ghana’s energy sector, particularly the financial sustainability of the Electricity Company of Ghana (ECG) and the overall power distribution framework, President John Mahama underscored the critical need for reforms in the energy sector, highlighting issues of inefficiency, procurement irregularities, and revenue losses at the ECG.
The meeting which the President described as a ‘new chapter in Ghana’s energy governance’, paid attention to efforts to introduce private sector participation in the distribution and billing of electricity, referencing the controversial Power Distribution Services (PDS) deal that was initiated but subsequently terminated under the previous administration.
President Mahama is dismayed at the current losses of about 40 percent of total expected revenue of ECG. He therefore emphasises the importance of private sector involvement in reducing the ECG’s losses and improving revenue collection, suggesting that a well-structured and transparent partnership could yield better results than previous attempts.
“If you made 40% commercial and technical losses and continue to think that you have a viable business,” Mahama said, “something must give in that sector.”
However, the former Managing Director of ECG, Samuel Dubik Mahama, has dismissed the government’s proposal to privatise the power distribution company, arguing that, private sector participation is already integrated at the metering level and questioned the necessity of further privatisation.
Instead, Mr Dubik is confident that ECG could thrive if the government builds on the foundation laid during his tenure, despite his acknowledging the inefficiencies within ECG although also highlighting areas of operational efficiency.
“I do admit that there are a few inefficiencies in the company, and in the same way, there are a few efficiencies, he asserts. Now before you do any private sector privatisation what are the benchmarks? Let’s not forget there is already private sector participation in ECG.
“At the metering point under the loss reduction programme. Under this programme, the ECG has moved from its previous position where it used to look for a large sum of money to purchase meters to come and install. That is one thing that I decided to change when I became the
Managing Director and I had a discussion with the board, was that looking for cash or capital to purchase meters, for usage, doesn’t make sense.
“Why don’t we get all these metering companies and tell everybody to have a factory in the country? Based on that, we now have about seven metering companies that have factories in Ghana. What we then did was to give them a locality to install their meters…and that is private
sector participation. If you do the math very well, you realise that it saved us a lot. More than almost 50% of how much you now have to borrow and all those administrative costs.”
When asked about the main problem that needs to be solved for ECG, he said, “The first one forex… you buy the electricity in dollars and you come to sell it in cedis. And you go and look for requisite dollars to go and pay…If you are going to look for US dollars to pay the Independent Power Producers (IPPs), will the money be enough to pay the whole value chain?”
Meanwhile, President Mahama has criticised the current procurement practices at the company, questioning why the ECG would procure items that would not be needed for several years.
“We can start to look at their procurement systems,” he said. “Why would you procure items that you don’t need until five years or six years after? So much of the revenue that is collected must go to pay for power that is generated.”
He also called for the more effective implementation of the cash waterfall mechanism to ensure that IPPs are remunerated for their services promptly.
“How to make the cash waterfall mechanism more effective so that at least you people are getting back part of your cost while we look at the outstanding debt. These are issues that we want to look at. But we’re going to do that in concert with you,” he added.
Additionally, during his vetting, the Energy Minister-designate, John Abdulai Jinapor, reiterated the need for increased private sector involvement in the operations of the Electricity Company of Ghana (ECG).
“We believe there should be private sector participation. What we intend to do is to form a seven- member committee, chaired by technical experts, legal aspects, financial experts, and some industry players, and even somebody from the consumer side,” he stated.
According to Mr. Jinapor the committee will be tasked with designing a comprehensive framework based on global best practices to determine the most suitable model for private sector involvement, whether it be a concession model or full privatization. He assured the Parliamentary Appointments Committee that the process would be devoid of political interference.
“We will stay off as politicians and let them develop a framework in a transparent, open, and frank manner. Once we get the buy-in of Ghanaians, we can set standards using a Request for Proposal (RFP) or competitive tender process,” he added.
Mr. Jinapor stressed that the government would not resort to sole-sourcing for private sector participation in ECG operations. Instead, a competitive process with a strong emphasis on local content and Key Performance Indicators (KPIs) would be adopted. “Our approach ensures a clear path forward, incorporating private sector expertise while safeguarding national interests,” he explained.
The Minister-designate also revealed that the energy sector debt has ballooned to US$3 billion.
Meanwhile, the Public Utilities Workers Union (PUWU) has vehemently opposed the privatization of ECG. Rather, the Union is assuring of its collaboration with the current government to resolve challenges facing the Electricity Company of Ghana (ECG) and the power sector. In a statement signed by the General Secretary of PUWU, Timothy Nyame, the Union appealed to the President not to privatize the ECG.
“We can vividly recall the engagement we had with the previous NDC administration regarding the issues of the power distributor ECG. PUWU’ of TUC Ghana wishes to reaffirm that its position on ECG privatization and management remain unchanged and believe the best alternative presented still stands as the best for Ghanaians and other stakeholders.
“As a Union with membership mainly in the utilities and housing sectors of the country, we are ready to collaborate with the government in finding permanent solutions to the energy, housing and water situation and at affordable cost to Ghanaians,” Mr Nyame said in the January 13 press release.
He further stated that, PUWU is very much aware of the investment done in the energy sector by both local and international partners. He appealed to President John Mahama to sustain discussions with these partners to resolve the energy challenges.
“PUWU of TUC Ghana is not unaware of many interest groups, locally and abroad, when it comes to investment in the power and energy sector, we are also aware of many who paraded the corridors with interest in ECG in the past and have metamorphosed and resurfaced to continue their game.”
Another critic of the privatisation of ECG is a private legal practitioner, Martin Kpebu. He believes urgent reforms and the appointment of selfless leaders to manage the Electricity Company of Ghana (ECG) could change situation for good. He, however, expressed concerns over how contracts, such as the controversial HUBTEL contract, were awarded, suggesting they were driven by profit motives rather than genuine efforts to improve the sector.
“We’ve had situations where decisions were made, not for the benefit of the people, but to enrich a few. These contracts have led to inefficiencies and left the industry worse off,” he said in reaction to the current government position of increasing private hands in ECG, last week.
“We need an independent process for appointing the ECG’s leadership. Let’s select the most competent and honest Ghanaian, someone who can run it without favoring family, friends, or private interests. That’s the only way forward,” he added.
Mr. Kpebu’s remarks highlight the need for bold reforms, transparent leadership, and a commitment to public interest to revamp ECG and ensure efficient power distribution in Ghana.
Conversely, the Executive Director of the Africa Centre for Energy Policy (ACEP), Benjamin Boakye, has backed the immediate privatization of ECG to address inefficiencies within the power sector and reduce the financial burden on the government. He emphasized that privatizing ECG would enhance operational efficiency, stabilize the system, and potentially lower electricity costs for consumers. According to Mr. Boakye, the government’s continued management of ECG has proven unsustainable, with inefficiencies bleeding the national budget. He explained that despite the state’s efforts, inefficiencies in ECG’s operations continue to divert significant tax revenues into supporting the struggling entity.
“There is no sector that bleeds Ghana like ECG,” Mr. Boakye asserted in an interview, last week. “Even if President Mahama made ECG an NGO today, there is no guarantee that subsequent governments would avoid the same cycle of inefficiency.”
Mr. Boakye highlighted the risks of postponing critical decisions, such as deferring maintenance on pipelines, which could lead to a higher demand for liquid fuels in the future.
“Pushing these decisions to later dates only creates a cycle of increased demand, inefficiency, and debt. We need to take the bull by the horns and address these challenges now,” he said.
Addressing concerns that privatization could lead to higher electricity tariffs for consumers, Mr. Boakye argued that effective regulation by the government could ensure fair pricing even under private ownership.
“The private sector can invest in ECG, but it is the state’s role to regulate their operations. This has been successful in other sectors, like telecommunications and banking, where private companies operate under state oversight,” he explained.
He dismissed claims that electricity is too essential to be handled by private entities, stating, “Power is no more important than tomatoes or rice. The narrative that the state must manage electricity because it is essential often allows inefficiencies to persist under the guise of serving the public interest.”
Mr. Boakye pointed to the inefficiencies within the current structure of ECG, including overstaffing, as a key reason for its financial struggles. He urged the government to prioritize efficiency and embrace privatization as a long-term solution to the challenges in Ghana’s energy sector. He also criticized the regulatory environment, noting that entities like the Public Utilities Regulatory Commission (PURC) lack the independence and power to hold state-owned enterprises accountable.
“Government has never been good at regulating itself,” he said, citing the inability of PURC to enforce fines on ECG.
Mr. Boakye concluded by emphasizing that privatization of ECG is critical to freeing up resources for other development needs, stabilizing electricity supply, and creating a more efficient energy sector.
“The time to act is now,” he urged, adding that failure to address these challenges could lead to more financial strain on the government and a less reliable power system for Ghanaians.
