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Opinions of Tuesday, 5 July 2016

Columnist: Bright Simons

Ghana and the unending debt chain

President John Mahama President John Mahama

While sweating in the dark, do you occasionally wonder what a crash course in Ghana's energy situation might look like?

Well, it is pretty straightforward if you have a bit of time..

So the Government of Ghana owns GNGC, VRA, ECG and GRIDCO. VRA and GNGC are wholesalers of energy products. Gridco is a transporter. ECG is a retailer. But remember, they are all owned and controlled by the Government, so we are justified to call any and all of them 'Government' whenever we want. This will come in handy; just watch.

GNGC owes Government of Ghana a billion dollars that Government borrowed from the Chinese. GNGC now has a gas plant. So it sells Gas to VRA to produce power. But VRA doesn't pay. So VRA owes GNGC nearly $400M. Which means GNGC can't pay Government, which in turn can't pay the Chinese. But Government isn't complaining, for now.

VRA owes GNGC because it sells power to ECG, which can't pay. ECG thus owes VRA nearly $1 Billion. ECG can't pay because the Government owes it $600M from various subsidies under different names.

Government can't pay because the cost of the power keeps increasing and the undercover subsidies it has committed to keep exploding in value.

The cost of power and subsidies keep increasing because the government won't pay its debts and therefore ECG and VRA have to resort to expensive bank loans to keep running (now a cool $1.6 billion in liabilities). Which leads to a shortfall of power as VRA can't find money to invest and pay suppliers.

So the government goes and bring in Dubai and Turkish generators that
produce power at nearly double the price that VRA can't pay and sells the stuff to VRA with a wink. VRA sells to ECG with a wink. ECG is like, 'guys!'
So Government now decides to step up the game and ask ECG to cut a neat $100M from sales as subsidies, just like they always do it.

Government is tired of Ghanaians complaining daily about the cost of power when they get it and complaining when they don't get. So, Government tells ECG to give Ghanaians $100M worth of free power on Government's tab (yeah, the 'subsidy' thing).

ECG says thanks for the $100M that Government doesn't have and thanks for Government asking the Turks to bring twice more of the power that ECG can't pay for. But what about that other $600M of power you made us sell for free on your tab?

Government gives ECG a sharp look and says: Look, YOU actually you owe me (yeah, I'm GNGC-VRA-GRIDCO-BIG-KAHUNA-BURGER-WITH-EVERYTHING-ON-IT, damn!). Bet you forgot that!

What I am going to do, says Government, is go and borrow another $2 billion and spread it around on the books of you and the other guys who owe me. Of course, you are going to use the cash to pay me some of the money you owe and then I am going to pay you back with some of the money you pay and't you worry your little head about that for now.

When all is said and done, you - ECG - are gonna look so damn attractive that someone is going to come over here from The Big Overseas and make some cool money from you. Yeah.

So that's where we are now, folks. Thanks for your understanding.

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