Ghanaian workers against privatisation of energy sector
Published on Fri, 2015-06-26 14:59
The country is experiencing its worst energy crisis in over a decade which is paralysing the economy and ruining livelihoods. Two public demonstrations were held late February in Accra and Kumasi, Ghana's two main cities, over electricity load-shedding which gives consumers 12 hours electricity and 24 hours total blackout.
But while the opposition-led demonstrators were thumping the streets with anti-government placards and slogans, organised labour in the country took up the struggle on a different front largely ignored by organisers of the demonstration but which many consider as being at the heart of the energy crisis.
The workers have come out strongly against government's plan to privatise the Electricity Company of Ghana (ECG), the state-owned power distribution utility. Spearheading the struggle are the Public Utility Workers Union (PUWU) and the Public Service Workers Union (PSWU) - made up of workers of ECG, the Volta River Authority (VRA) - the state-owned power producer and GRIDCO, its sister power transmission company.Their position is also supported by the Trade Union Congress (TUC) and other organisations.
Privatising the ECG is the outcome of negotiations between the government of Ghana and the Millennium Challenge Corporation, an aid agency of the US government. Under the agreement the Ghana government will access the Second Millennium Challenge Account (MCA) for a grant of 498 million dollars to restructure the energy sector with the condition that it allows private sector participation in the energy sector.
But in a statement jointly sent out by the workers in January this year, they describe the government's approach to the energy crisis which relies on restructuring the ECG as the key measure as wrong-headed.
Instead, the government has been told to address the power generation deficit which is the major cause of the energy crisis in the country.
“The fundamental problem in Ghana's energy sector is a shortfall in generation and that should be tackled as a matter of urgency. The proposed approach under the Compact to solve the challenges facing the power sector that focuses on the ECG turn around as the key is not the best approach”, the workers point out.
The ECG has become the lightning conductor for public anger and frustrations in the current energy crisis which is causing hardships and strangling the economy further. Small-scale enterprise operators such as hairdressers, seamstresses, carpenters, cold store operators and internet café owners face imminent bankruptcy as inadequate electricity supply which is ruining their businesses. Economic activity runs the risk of grinding to a halt. It is a source of worry for Director-General of the Ghana Revenue Authority, George Blankson, who, in February, told the media that the government's tax collector is losing revenue because businesses are unable to retain workers due to the energy crisis which has brought production in the manufacturing sector to a near halt.
Being the first point of contact between the public and the electricity sector, ordinary consumers consider the ECG the symbol of all their frustrations in the electricity supply. Electricity supply or rather the lack of it is the single most important talking point around the country. Indeed some political analysts predict that it could be a game changer in next year's presidential and general elections in the two-way contest between the ruling National Democratic Congress (NDC) party and opposition New Patriotic Party (NPP).
In that kind of atmosphere, the government is trying to cash in and manipulate public opinion by blaming all inadequate electricity supplies on the managerial deficiencies of ECG but the workers have dismissed that as wrong diagnosis and instead place a firm finger on the inability to generate enough power to meet rising demand.
The Minister of Power, Dr. Kwabena Donkor did concede that the primary cause is the shortfall in generation when he informed the media in February that it is what “has led to the supply inadequacies leading to the current load shedding that we are all experiencing”.
Ghana's electricity demand increases by 12 percent annually, the highest in sub-Saharan Africa, says William Amuna, CEO of GRIDCO. Total demand currently stands at 2100 MW. But against this total demand, available generation supply is just 1600 MW. According to Amuna, the country's generation capacity stands at a total of 2,800 MW from all the mix of hydro and thermal plants installed, but not all of that can be brought into stream because for one thing, an unexpectedly low rainfall this year has crippled power production from all the three dams which generate hydropower. For another thing, the thermal plants fired by gas are also not generating at maximum capacity, and that is largely blamed on Nigeria reneging on its legal obligation to supply Ghana with 120 standard cubic feet of gas through the West African Gas Pipeline. That alone has chopped off 450 MW from the total power supply.
Consumption would rise to 2,400MW if one throws in the power consumption of aluminium smelter Valco, formerly owned by American aluminium giant, Kaiser Aluminium- a company which looms large in the history of Ghana's controversial energy policy.
Indeed Ghana's energy policy has exhibited a number of features. Over the last past 20 years for example, the VRA (Volta River Authority) has been progressively weakened by a combination of government policy as well as particular practices and also these things has affected the Electricity Company of Ghana. These policies for example have included the selective suppression of tariffs, which has meant that the generator particularly VRA has not been able to get a proper rate of return.
Worst of all, in 2006 after the government bought Valco which by then had become an obsolete plant and having bought it the government had to use it and VRA was made to give Valco power at a third of the cost of generation. This created such a crisis for VRA that it became a threat to the whole economy because outages were affecting everybody. The World Bank had to intervene and make the government pay the arrears owed by Valco to VRA.
This backdrop provides substance to the workers' argument that focusing on the ECG as the major cause of irregular power supply and therefore privatising it as a measure to solve the energy crisis is a wrong-headed approach. If the government is seeking new source of funding to restructure the operations of the ECG the workers advise that such funding can be sourced domestically instead of always turning to external assistance. For instance, listing ECG on the Ghana Stock Exchange, the workers point out, could raise the needed capital, citing the example of state-owned petroleum products retailer, GOIL, which has taken that path and is doing well.
In any case, who is the cause of ECG's current final crisis? The answer lies squarely with the government, according to the workers. “Forty percent of ECG monthly bills go to the government which doesn't pay up”, they say.
The state is the biggest consumer of electricity but does not pay its bills. As of October 2014, figures given by the workers indicate that government indebtedness to the ECG was GHC 1 247,597,280.51, the equivalent of US$375 million, constituting more than 62 per cent of the company's debts. By failing to pay its bills to that tune, it is the government which is gas-choking life out of ECG causing a knock-on effect on the power delivery chain. The ECG has to buy power from VRA and Independent Power Producers (IPP) to distribute to household consumers and industries but who in turn, due to debts owed them by ECG can neither maintain their plants and equipment nor purchase new ones in order to increase generation.The ability of ECG to even replace their transformers is undermined, thus giving rise to the erratic power supply - the “transmission capacity constraints” that the workers have already complained about in their letter.
“It is our firm position that if the challenge of power supply is not first addressed, the much touted private sector participation (PSP) will only bring about increased tariffs and accumulation of profits for the private operator whose ultimate objective is not the betterment of the national economy and the Ghanaian society”, according to the workers.
As Dr. Yao Graham, Co-ordinator of Third World Network-Africa (TWN-Africa) and a keen follower of Ghana's energy policies, put it, “having undermined the ECG the government with support from the support of the opposition NPP (the New Patriotic Party) in Parliament now turns round to use its difficulties as justification for privatizing it under the Ghana MCA Energy project”, he says. And the workers ask whether plans to privatize the ECG could be likened to the proverbial “giving the dog a bad name and to hang it”.
One of the conditions for the MCA grant is that the ECG is cleansed of debts in order to make it attractive for private investment and so the government has actually agreed to clear all the debts it owes ECG. “So perversely while the government will not pay its bills to keep ECG alive it will urgently do so to prepare it for privatization”, comments Graham.
“Even more bizarrely”, he continues, “after years of policies and practices that have weakened not only the ECG but also the VRA it will ensure the profits of the private firms who will take ECG's assets and the independent power producers (IPPs) who will sell power through ECG”.
Equally bizarre was how the Executive branch rail-roaded the Legislature into approving the MCA Agreement in just two days without serious interparty debate, bypassing Parliamentary Procedure and undermining the oversight role of the legislature.
When it comes to offering state-owned utilities to foreign companies, Ghana has been down that road before. A few years ago, the government entered into a similar PPP arrangement with Aqua Vitens Rand Ltd, (AVRL) to manage the country's Ghana Water Company, but that ended acrimoniously and the government had to back off renewing the contract and repossessing GWC in 2011 after pressure from workers andcivil society organisations who complained of the poor performance of AVRL.
As the Utility Workers Union oppose the privatisation of ECG, the episode of GWC and AVRL is probably still fresh in their minds. However, the trouble is that as the workers put aside the usual bread and butter issues associated with trade unionism to pick up a fight over a valuable national asset, little voice of support has come from similar organised groups in the country.
By Linus Atarah.
Source: African Agenda Vol.18. 2.