Feature Article of Thursday, 19 February 2015

Columnist: Quaicoe, Nana Attobrah

Ghana’s economy heads for a collapse

.....as President Mahama sticks to his rhetorical solutions…

Living in Ghana these days comes with a lot of pain and sacrifice. People are not just having to cope with the most unbearable difficulties, but living in itself gets worse by the day and there is not a glimmer of hope in sight. It is as if we have been afflicted with the most clueless leadership ever. Everyman for himself is the new order. Governance has been reduced to cheap rhetorical with a gaping widening disconnect between what Ghanaians experience daily in their lives and what leadership is saying to be done or doing. Government’s recklessness at managing the economy plus its gross physical indiscipline and its indecision has cast a spell of inertia over the entire country. Ghanaians are being subjected to untold hardships.
Let’s not kid ourselves, the future looks gloomy. Every fiber of evidence points to one scary but indisputable fact – THE GHANAIAN ECONOMY IS GRINDING TOWARDS A COLLAPSE! We are living in the worst of all possible times and even the diehard optimist like myself fears this is true!!
There is not one sector of our national economy that seems to work. Worse now is the gripping state of our energy situation that has cost this country about $3 billion. The truth though is that our power situation does not exist in isolation of the rest of the economy, it is a reflection and an integral part of the entire government induced mess. How on earth did we drag ourselves here in the first place, I ask. For the past 36 months or so, leadership has been pretending to be dealing with a situation that practically worsens in spite of all the interventions claimed to have been made albeit at the lip level. I describe the situation as worse not just because of its economic cost but rather because the government had the benefit of an advance warning from the VRA, that the country’s power sector was heading towards where we now find ourselves….24 hours of ‘dum’ and 12 hours of ‘sor’!! Government also had the benefit of the knowledge of the cyclical drought associated with our hydro dams. With the benefit of all these information, the least one could expect was a plan to avert the disaster but that too remained at the rhetorical level. 3 years down the line, the president is still searching for funding for his loudly trumpeted Turkish barge while cold stores, hospitals, schools, sachet water producers, factories, hotels, banks, beer bars and night clubs, barbers and hair dressers all reel under the weight of the longest and most intensive load shedding ever in the history of Ghana without a clue to when it would end. If this is not a manifestation of stack incompetence, then I fail to know what else is.
Worst of all the situations is that the words of the President, call them directives, promises or assurances mean next to nothing. His words don’t get anything done. The words of President John Mahama has proven to lack gravitas as far as governance and providing solutions to the needs of Ghanaians are concerned. In the midst of the energy crisis that we find ourselves, we are yet to see any comprehensively packaged solution for scrutiny with benchmarks and timelines for the immediate, short and medium term resolution strategies. It’s been the case of one failed Presidential directive to the other, one failed assurance upon the other and one failed promise after the other. The President’s defense that the power crisis cannot be resolved overnight is neither here nor there. He has had much more than an overnight to resolve the power problem. Indeed the latest power crisis equally did not happen overnight, it’s been with us for the past 3 years.
It had been so easy and convenient for government to heap the blame for our energy crisis on the Nigerians and the West African Gas Pipeline. Subsequently, we were told that the tariffs we were paying was too low to enable VRA buy the needed crude oil and once we paid the ‘realistic tariffs’, voila!!, all our power challenges would evaporate. Consequently, we were slapped with tariff increment after which reliable power still remained an illusion. Next, the President and his team assured Ghanaians that once Bui dam came on stream, the days of dumsor would end, that too failed with a bizarre explanation that Bui was never built to run all of its 4 turbines else the water in the dam would run out. Then came the mother of all promises, which said the magic wand lies with the Atuabo gas plant which was expected to deliver 120 mmscf of gas per day. Once this was achieved, there would be no need to rely on the erratic gas supply from Nigeria because we would have our own reliable gas supply. Behold, Atuabo is here albeit late and after several failed completion dates. The question now is, why are we still experiencing a worsening dumsor?
In the past few days to weeks, our power generation has worsened and running on less than 1410 MW at peak. Akosombo has had 2 units shut down and threatening to shut down a 3rd because of the declining water levels. Even the remaining turbines at Akosombo are forced to run at levels far below their installed capacity. Bui, by default, operates at half its quoted installed capacity and is now doing half of even that. Kpong is down also due to low water levels and retrofitting. TICO has 2 units down, undergoing repair works, so that even if there is reliable gas supply from Atuabo or anywhere, the plants would still not run at its optimal capacity and therefore we would still be load shedding.
Again, if its not the absence of a power generation strategy, why would we have an ongoing 220 MW installation project (Ktpp) at Tema that is designed to exclusively feed on gas from the WAGPL which history has shown to unreliable? We want to be self-reliant, so why was Atuabo not designed to feed into the pipes of the WAGPL such that in the failure of the WAGPL, Ktpp can still be fed with Atuabo processed gas? The project is nearing completion and Atuabo gas by design is unable to supply this new plant with feed and so in the midst of plenty gas, Ktpp will have to be fed from elsewhere.
And we have the President and his team act like Ghanaians are a bunch of ignoramuses who are rather impressed by his chain of rhetorics and syllable recital perhaps hoping to speak or wish solutions into the problems without planning, strategy and action.., his latest energy solution strategy in the creation of a Power Ministry only betrays his ill appreciation of what really the challenge is about. The newly appointed Power minister also seeming eager to impress his appointing powers, rather betrays his frustration and desperation. He calls a press conference that not only succeeded in restating the power problems as we have always been aware of but also telling us the President is lazy. He describes Journalists as being lazy for ever believing without investigating, that poor gas supply from Nigeria was the cause of Ghana’s power crisis. I ask the Minister, why he stopped short of calling the President lazy because he was chief in trumpeting that allegation. Indeed, few days ago in Germany, before the Power Minister’s press conference, President Mahama, in responding to questions and briefing Ghanaians resident in Germany on the challenges facing the country, repeated his claim that unreliable gas supply from Nigeria was mainly responsible for the current ‘dumsor’. Was the President taking his information from the lazy journalist or his appointees?
Like I said earlier, even if Ghana receives the complement of all the gas reserves in the world, Ghanaians will still be under load shedding. Why? Because our current predicament is not due to poor gas supplies but to do with the disrepair state of our energy installations and the low water levels in our dams. Due to persistent political interference, these facilities were denied their scheduled maintenance because the powers that be, considered as more important the political gains to me made from having power albeit erratic than the collateral damage and cost to the economy when the system collapsed as a result of neglecting scheduled maintenance.
It is in similar brazen recklessness that government few days ago forced Akosombo dam at record low water levels to run five of its six turbines just to ensure there was power for Ghanaians to be excited during the xmas and football fans enjoyed the African Cup of Nations. Power from Cote d’Ivoire indeed. How much power was actually imported from that West African country? Less than 100 MW and that alone could not have been sufficient to power most of Ghana. That singular act of recklessness nearly collapsed the already challenged dam, but does he even care?
About a year ago, the President made a promise to Ghanaians to deliver a 450 MW barge from Turkey to finally end the dumsor. 12 months down the line, the barge is yet to arrive on the shores of Ghana and only last week, President Mahama is now forcing GNPC to raise the necessary funding required for the deal to go through. Another question to ask is: where will the Turkish barge get its feed to power itself since it would not be arriving with crude nor gas? Is government prepared to pay for the cost of crude oil which price is gradually bouncing back, not overlooking the resumption of decline of the cedi? If money is readily available to sustainably buy crude for the barge, why is government not buying this same crude oil to power the CENIT and other smaller plants at Tema not affected by disrepair which could have easily provided Ghanaians relief of some 150 MW all this while? None of the thermal turbines we have produces more than 150 MW, yet each takes about 5000 barrels of light crude oil (LCO) to provide us power. In the very recent time, VRA was spending $55 million every 3 weeks only to charge tariffs that could barely cover 60% of its operational cost. The continuation of such forced illogical operation at VRA will only end up destroying that National Asset because it’s unsustainable!
Even the much hyped GE 1,000 MW thermal plant touted to deliver about 1200 MW from the 170 mmscf/d ENI gas project albeit at the rhetorical stage would require in-depth scrutiny if/whenever the technical and financial details of the deal are made public. A simple comparison between the 550 MW Aboadze plant which requires 120 mmscf/d and the GE1000 MW plant which is expected to feed on the 170 mmscf/d from the ENI fields will suggest that the surplus 50 mmscf/d from the ENI project is woefully insufficient to generate the extra 650 MW that government claims. Granted that the gas from the Ghanaian fields is denser than what we receive from the WAGPL, what type of turbines are we to expect with the GE1000? What are their efficiency levels? GE has recently developed very efficient turbines that come with a very huge price tag. It will therefore be nice to know the total value of the proposed GE plant. And at what temperature will the gas be pumped because they all help in determining the efficiency at which the turbines produce power? It will be another sad episode if this rhetorical project finally translates to reality only to be given excuses as has been given in the case of Bui dam on the reason why the plant will be running on a capacity different and less than its installed capacity. Until we get the technical details of the project, Ghanaians should hold their breath because it is difficult to evaluate how 170 mmscf/d can produce 1200MW.
The crux of the power problem, which the President and his team continuously shy away from or pretend to be unaware of, can be found in the low tariff regime of our power generation and sales arrangements. Any solution that seeks to address the energy problem without tackling head-on Ghana’s poor electricity tariffs is only scratching the surface and therefore unrealistic and unsustainable. Gas is not that scarce, indeed, there is sufficient gas for sale out there. As it is, industry and domestic consumers are paying far more for the cost of power that they use as a result of load shedding and line losses. The business of power generation is a capital intensive one just as it is highly rewarding for the investor as well as the consumer and country so long as the pricing fundamentals are set right. This is the only incentive that can attract and sustain the commercial interest of Independent Power Producers (IPP). Government lacks the financial muscle to realistically and directly engage in the business of power. It is such dealings that have almost collapsed the VRA where government forces it to incur debt by selling power at rates less than it cost to acquire and cater for its operational cost, hence the increasing inability of the state entity to raise the requisite LC’s to buy crude oil.
There is a growing campaign for cleaner and renewable energy like solar but then what will it cost in terms of funds and land space to produce say 550MW from solar? Though these huge investments can pay for themselves over the long term, they remain unattractive due to the huge financial commitments required for the production of a unit of power. The world’s largest and most modern solar farm in California called Topaz was completed in 2014. It produces 550 MW, with 9 million solar panels, covering an area space of 25km2 costing $2.5 billion.
Ghana should stop talking about producing power for export and focus on the relationships that will be generating reliable power for domestic and commercial consumers. If we had a blueprint stating what amount of energy that would be needed to reliably power Ghana commercially and domestically for the next 5, 10, 15, 20 to 50 years, we would realize that 5000 MW is nothing to be jumping about in excitement of exporting prospects because any serious country thinks about industrial growth when it plans for power growth unless of course the Minister of Energy hopes that this present crisis would have completely collapsed the little manufacturing base that we have left at the time the rhetorical 5000 MW comes to physical manifestation. A country that does not have its power dynamics right, simply has no business planning for or expecting economic growth. Ghana is not broke because we do not have resources, rather, it’s the abundance of it and lack of visionary and competent leadership.
For any leader to be taken seriously by his followers, team and peers alike, his words must be of substance and carry weight. There must be a corresponding relationship between what the leader says and what is happening on the ground. This means that sufficient planning plus grounds work must have been done, and only waiting for the president’s words to activate prompt execution. More than any PR gimmick like gazing into the skies and pointing towards heaven, the delivery on the words of the President is a more effective and sustainable PR else his words are taken as empty and not taken seriously. Any leader whose words can’t be taken seriously is finished. Evidence abounds showing that there are little or no foundations laid for all the assurances, promises and directives emanating from the presidency and therefore all the disappointments. The best PR any leader can ask for is the promptness with which action is initiated and delivery made on his directives. Action they say speaks louder than words. It is the measure of an effective and purposeful leader. Aside the inadequacy of tried and competent hands around the President, another area, his leadership is showing to grossly lack is not having actions backing his words. And that does not excite confidence of the people in a leader. As it stands now, the president’s words are proving to be empty and only worth a pretentious PR value. Problem resolutions with President Mahama begins and ends at the rhetorical level.

Nana Attobrah Quaicoe

The author of this article is the Head of Research at the Danquah Institute.