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ECG will make or break Ghana’s power sector

ECGThe Electricity Company of Ghana has been cited in a recent report by the World Bank as failing financially and operationally.

The World Bank report titled “Energising Economic Growth in Ghana-Making the Power and Petroleum sectors rise to the challenge” asked the government of Ghana to “think big”  and “provide proactive leadership” to avert the failure of the ECG and other institutions in the energy sector.

The ECG’s financial woes stem from uncollected revenues from both the private and public sector consumers. Government and public sector organizations owed the company GH¢222 million at the end of 2012, whereas uncollected revenues from private consumers approximate to GH¢205 million.

Apart from uncollected revenues, the report stated that the depreciation of the Ghana cedi has increased the cost of various obligations of the ECG denominated in US dollars. The report however fell short of providing information on  what these obligations are.

The third contributing factor to ECG’s financial challenges is its inability to charge realistic tariffs from consumers viz-a-viz the increasing costs of its operations. This the report blamed on the public utility regulator’s failure to implement automatic tariff adjustments.

Finally in terms of finances, the ECG’s poor financial judgement in procurement, and excessive inventory costs were highlighted as contributing to its financial failure.

On the operations side, the ECG is laden with weaknesses in its management, corporate governance, and institutional culture.
The report stated that there is the need for “profound change” in the operations of the organization by for example the recruitment of high-caliber managers and first-rated Board of Directors. Also the ECG’s top-heavy and over-centralized operations was cited by the report as the bane of its current state.

The ECG also has high distribution losses which stand at 27% in the second quarter of 2012. The report suggests that should these losses be cut by 10%, the company would save US$85 million per year.

By Dode Seidu

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