The World Bank says it supports the privitization of power distribution company, the Electricity Company of Ghana (ECG).
Speaking in a recent interview, Country Director of the World Bank, Pierre Laporte, noted the privitization of the state firm is still the way to go.
“The losses of ECG due to inefficiencies and rising debts will continue to persist and pose risks if they are not addressed. The World Bank doesn’t believe ECG should be privitized for privitization sake because there are very good examples of SOEs around the world that are efficient and commercially driven. But it has also been proven that in cases such as this, the private sector is better placed to manage the activities of the troubled SOE more efficiently and cost effectively, so we feel privitizing ECG will bring benefits to the country,” he stated.
Debates concerning the privatization of ECG are still ongoing following the Public Distribution Services (PDS) saga, leading to the abrupt termination of its contract to manage the state enterprise by government.
A report by the Institute for Energy Policies and Research (INSTEPR), on its outlook and expectations in the energy sector for 2021, noted that inefficiencies in the power sector such as electricity transmission and distribution have reached 4.7 per cent and 26.63 per cent respectively this year.
“There are transmission losses of 4.7 per cent this year, which is 1.8 per cent higher than the projected losses of 2.7 per cent. Distribution losses have also increased to 26.63 per cent as against the regulatory Benchmark of 23.2 per cent,” INSTEPR said.
The Institute in its report also called for the privitization of ECG.
“There is a need for huge capital investment into the electricity distribution and transmission infrastructure in the country to help reduce these losses. The aborted Private Sector Participation (PSP) program with ECG was to invest over $500 million in new infrastructure to reduce these technical and commercial losses. The Institute is of the view that the PSP program should be initiated again in 2021,” INSTEPR added.
INSTEPR in its report also cautioned against the growing indebtedness of the power sector, stating the rising debt could result in the collapse of the economy in the post-Covid world.
“The power sub-sector is the one area that needs serious attention as well as resources. The ESRP stipulates that if no action is taken, the indebtedness within the power sector could reach $12,524 million by 2023 which will be about 18.7% of our current GDP. In the post Covid-19 world this growing debt can collapse the economy,” said INSTEPR.
“The Independent Power Producers (lPPs) has an unpaid invoice of up to $1.44 Billion as of September 2020, according to CIPDiB. This debt keeps growing though the Cash Waterfall Mechanism has been implemented since April 2020,” it also noted.