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Opinions of Wednesday, 30 August 2017

Columnist: Michael Sumaila Nlasia

Open letter to ACEP on backing the sale of VRA thermal plants

The prevailing problems at VRA are not merely management problems The prevailing problems at VRA are not merely management problems

Dear Benjamin Boakye,

I read your opinion backing the sale of VRA thermal plants in an interview posted on the web of the Daily Express.

It reminds me of an old adage which says that politics is nothing but a concentrated form of economics.

It also reaffirms a statement by a favorite guide: “the world is composed of two people, competitors and creators; don’t compete when you can create.”

We have been honored by the Africa Center for Energy Policy (ACEP) stringent advocacy to safeguard proficiency in the energy sector of Ghana’s economy; however, in the course of the integrated development of our economy, politics has somewhat been the stalemate in management.

In this management capability of our economy, i.e. the energy sector, there is no doubt that several forces are at play looking at the favorable potentials as Ghana is poised to become one of the largest energy producers (habour) in Africa despite our current power crisis – as a result of our gas supply connected with FPSOs Kwame Nkrumah, Mills and John Kufuor – which would produce electricity in excess of our demand.

What this means is that Ghana is at the potential level of lead industrialization in Africa. For example, earlier this year, we had confrontations from the Energy Minister and the US Ambassador to Ghana accusing ECG of ‘inefficiency’ without justification – an alleged secrecy to seek its privatization.

Parallel to this situation, the prevailing problems at VRA are not merely management problems – which solution cannot entirely be linked with the sale of its assets. There are several factors encumbering the efficiency of these state own enterprises (SOEs). Perhaps, it is high time we hold our technocrats and politicians to task and accountable rather than always resorting to jettison the challenges to solely privatization.

Selling majority of the thermal plants of VRA is no guarantee for efficient management of energy production in Ghana but to abet the unfettered capacity of free market cupidity of the private sector at the expense of the mass population.

Let me reiterate these questions: why should we contemplate privatizing the power sector of our economy? And why are people seeking to buy what has already been built but not building some to power them if the private sector is so efficacious and mighty?

Although it is true that VRA could be ‘inefficient’, but there are factors contributing to that, especially in the case where government agencies, including schools and hospitals, and deprived communities are not paying for electricity, but are among the largest electricity consumers next to industries.

How can we demand efficiency from them in such a problem situation? You don’t solve problem by ignoring the facts. Again the fundamental question is that, would privatization of VRA assets render payment for electricity by these government’s agencies to make VRA more efficient?

Your proposed statement that government must ensure that the prospective thermal company remains a subsidiary of VRA but with private sector participation through listing on the Ghana Stock Exchange could not necessarily be the motive of government but to offer it to syndicate.

One needs also to be reminded of the compact II agreement of the Millennium Challenge Account – which contains the Ghana Power Compact of $498.2 million to be used to fight poverty by transforming the country’s energy sector.

Obviously, this five year compact which is the largest US government transaction under energy power in Africa provides the conditions necessary for concessionary sale of the SOEs in the energy sector, especially in addition to the IMF strict conditionality the country is undergoing.

Antecedents have shown that the country has never survived to the end of the IMF recovery programs. This is because political freedom and economic freedom do not wear pants at the same time.

Finally, it is obvious in the days ahead a lot of issues are going to unfold with respect to the sale of the thermal plants. Indeed, the interest of Ghana in the future of our economic development lies on our energy capacity which can only be guaranteed by the state as majority.

Promoting privatization of VRA and ECG should rather be focused on the creation of private enterprises to generate and distribute power to effectively complement with these SOEs, not to always seek the wanton interest in the dissipation of the SOEs. To re-echo the statement: “the world is composed of two people, competitors and creators; don’t compete when you can create.”

By Michael Sumaila Nlasia
Research Fellow
Center for Data Processing and Geo-Spatial Analysis