To simply say that Ghana has an unstable supply of electricity is a polite way of describing the current power situation. To state it more clearly, the situation has been rough, stormy and continues to remain unstable. Domestic and commercial, users as well as businesses, have suffered as a result of the current power situation.

Despite the challenges with power last year, the electricity supply situation in Ghana improved considerably in the first few months of the year in many parts of the country, bringing relief to Ghanaian homes and businesses. Many businesses in Accra, such as Billy Saviour Wornyo’s printing firm, which had to depend on a generator, not as a backup, but often as the main source of electricity, heaved a sigh of relief. Well, that relief quickly dissipated sometime in July when the outages, popularly referred to as dumsor resurfaced.

Apprehension

Billy became apprehensive, dreading a return to the dark days of the previous years when he almost laid off his 11 employees because the cost of fuelling his generator was too high, making it almost impossible for him to carry on with the business.

That July scare may have been allayed, but for Mr. Wornyo, it presents a rude awakening that Ghana’s electricity problems have not have been comprehensively addressed and that the return to the days of 48 hours without electricity followed by 12 hours on, may not be so far away. Indeed, many say, the relief Ghanaians are enjoying now is a vote-winning ploy and that dumsor will return after the elections. But is that really the case?

 

Power problems

The resurgence of power failures in many parts of Ghana, especially the urban dwellings such as the capital Accra, is a symptom of a problem plaguing the entire continent. Underinvestment, poor management, and unsustainable conditions imposed on publicly-owned utilities have thwarted Africa’s power sector. Today, three-quarters of the population of sub-Saharan Africa—roughly 620million people—do not have access to electricity. And those that have access, including residents of major cities like Accra, Lagos, and Johannesburg, do not have enough of it and are forced to face repeated blackouts. This is not just an inconvenience—it’s a dead weight on economic growth, job creation, and social development.

The Institute of Scientific, Social and Economic Research (ISSER) of the University of Ghana estimates that the cost of load-shedding on Ghana’s economy could be as high as 6 percent of the country’s GDP, almost a billion dollars. Indeed this estimate excludes indirect costs. (Pg. 1 But this is not a problem without a solution.

 

Solutions

The solutions that work best are those that harness the resources and respective strengths of both the public and private sectors. Smart reforms that encourage private sector participation (PSP) in the power sector don’t need to cost a lot in and of themselves, but they can have a big impact in helping more people get reliable and affordable access to electricity. In fact, in some countries this is already happening.

Case of Uganda

Consider Uganda. Facing unrelenting blackouts in the 1990s, the country made a concerted effort to transform the power sector into a financially viable industry that didn’t have to rely on the government’s fluctuating budget. The idea was not to transfer asset ownership to the private sector, because officials did not want to shuffle all responsibility to the private sector. Instead, they brought in the private sector where it had expertise and capital to help achieve the government’s long-term objectives.

One of those areas was in electricity distribution—the low-voltage wiring that brings electricity to homes and businesses. In Ghana, as we all know, ECG is responsible for distributing electricity. A more robust distribution network not only means that less electricity is wasted along the way, but also that investors have more confidence that if they invest in power generation, there will be a utility on the other end to pay for power they generate. So with Uganda, in 2004, the Ugandan government entered into a concession contract with UMEME, a distribution company listed on the local stock exchange, to help the country modernize its distribution network [source: Powering Ahead: The Reform of the Electricity Sector in Uganda].

By setting a hard deadline on the concession, the government holds UMEME responsible for results. And the company’s investments in upgrades and expansions are paying off. Between 2009 and 2015, UMEME added nearly 500,000 homes and business to the grid—more than doubling total connections—and reduced power losses from38 percent to 19.5 percent [source: UMEME 2015 annual report]. To support these developments, UMEME increased its workforce and today employs roughly 1,300 people. And, ultimately, UMEME’s participation in the power sector has helped the government expand access across the country. Between 2000 and 2012, electricity access more than doubled from less than 9 percent to 18 percent of people in Uganda with access to power [source: World Bank].

Concession model

In Ghana, the concession model has been a subject of discussion. The concessionary model isn’t new or experimental. In fact, it was instrumental in building up the power sector in Cote d’Ivoire—which supplies a considerable amount (10%) of Ghana’s electricity consumption now, a reversal of the status quo which prevailed some years ago. In 1990, the government in Cote d’Ivoire granted a concession for transmission and distribution of power to a private entity [source: French Agency for Development article]. Since then, the country has developed one of the most effective power sectors in the region, providing access to nearly 60 percent of the population, compared to 35 percent across sub-Saharan Africa [source: World Bank].

Concession arrangements are not exclusive to the power sector. In 47 countries in Sub-Saharan Africa between 1990 – 2015 private participation in infrastructure resulted in over 500 projects reaching financing close across all major sectors including Airports, Electricity, ICT, Natural Gas, Ports, Railways, Roads, Water and sewerage. And there are countless success stories in Sub-Saharan Africa, including rail (Cameroon, Gabon and Cote d’Ivoire), ports (Benin, Nigeria, and Cameroon), airports (Cote D’Ivoire, Togo, Republic of Congo) roads (South Africa, Senegal, and Mozambique) and bridges (Cote d’Ivoire), and the list goes on.

Hope

For Ghanaians like Mr. Wornyo and his employees, there’s hope for solving Ghana’s power crisis and saving their businesses. Like the experience of the Ugandan government and others around the world, Ghana plans to bring in a private company for a fixed amount of time to help ECG to expand its connections, better serve its customers with more reliable power, and attract new investment in power generation. The private company will not only bring in its management expertise but also substantial investments in the system. In effect, it is putting its own skin in the game, and the concession contract will hold the company accountable in addition to the monitoring from the sector Regulators. Through this, Ghanaians like Mr. Wornyo, can be assured that the government and the private company are committed to transforming the sector together and making it work for everyone.

That prospect, and other reforms to the power sector supported by the Millennium Challenge Corporation, have, for the first time, gotten investors talking about billions of dollars in investment in power generation. That’s the scale of investment that will enable Ghana to transform the sector, rather than chipping away slowly at the problem relying solely on fiscal resources. The concession arrangement in Ghana, it is also believed, is one sure way to eliminate waste in the sector which consumers are made to pay for. And if the experience of countries like Uganda is any indication, business owners like Mr. Wornyo may soon be able to put their personal generators away for good.