Ghana’s power challenges and national productivity

As in every other aspect of Ghana’s economic fabric, the demand for electricity power is fast outpacing supply which is evidenced in the increased frequency in outages and now deliberate load shedding in order to ensure that available power is equitably distributed.

How far can Ghana hold out? Is Ghana able to meet the increasing demand for electricity power as its economy continues to expand? Utche Okwuosah attempts finding answers to these crucial questions.

For quite some years, almost a decade now, Ghana has been experiencing spates of jerky power supply which became quite a significant challenge to the NPP administration in the course of their second tenure.

The causes of the challenge were traced to the many years lack of maintenance of equipment which were fast getting obsolete, the seeming lack of vision which failed to anticipate the cost of absolute dependence on hydro power generation and its hydrological shocks, and the growth factor of both Ghana’s population and economy which has driven demand beyond supply.
Stemming the outbreak of this challenge was the last big task that confronted the Kufuor administration. Since the departure of that government till date it has been an engaging task managing the power supply situation to keep both home and industry averagely supplied while efforts continue towards normalising and bettering the situation. The fact of the matter remains that, with the reigning social, political and economic stability Ghana has been enjoying over the past decade, the economy particularly has been growing in leaps and bounds. For instance, the economy experienced an annual GDP growth of 14.4 percent in 2011 compared to 8.0 percent in 2010.

A phenomenal leap in growth, of course, owed to the entrance of the oil and gas sector. Again, spurred by both the sustained strong growth in the mining and oil sectors, it is projected that the real GDP growth for 2012 will increase to about
8.0 percent. Consequently, industries are springing up, the productive sector is expanding and the nation’s population is increasing in tandem with Ghana’s growing prosperity thus overwhelmingly driving electricity power demand beyond what available supply can meet.  Unfortunately, however, the current efforts of the government do not seem to be yielding adequate results soon enough hence the unabating disruption in supply despite the ongoing dedicated reform of the power sector.

 

According to the statistical data from Research and Markets, from 2000 to 2009, residential demand had risen by 61 percent driven by rapid urbanisation and high economic growth, especially as 52 percent of the population now live in cities (up from 42 percent in 2000). Also, industrial demand has grown as well by well over 64 percent on the back of the strength of the mining and the new oil & sectors. Indeed, Ghana’s electricity sector is evidently going through a period of invigorated reform intended to raise total installed power generation capacity by 65 percent or a total of 3,600 MW by 2013. The government has, over the recent years, sustained its reform program of the power sector which is largely aimed at attracting the private sector’s participation.

Hailed in different quarters as the right thing to do as a way of accelerating supply, the Independent Power Producers (IPP) appear not to be in a hurry to capitalise on the government’s “unbundling” of the sector. Speaking recently to a media house, the Chief Executive Officer of the Volta River Authority, Kweku Awotwi, thought that it was too early to jump to such a conclusion. “It’s still early but we know of two or three other IPP’s that are waiting to come in. The Chinese have already started implementing their plans. There are also two other IPP´s, who signed the “off take agreements” with ECG, so we hope to see results in the next couple of years,” he was quoted to have said.

Considered coming too late, involving the private sector remains a smart thing to do so that Ghana does not go the way other African nations have gone which has resulted in complicated and bureaucracy encumbered power generation and distribution system not even helped by government’s inefficient and wasteful monopoly.

“Broadly, I will say the move to encourage new investment has now started but it was a late start however,” Mr. Awotwi had opined. “There was an act passed four years ago to modify VRA, where VRA will just be the power generator and there will be a transmission company (GRIDCO) that will transmit the power, that was an important first step, because it has allowed for a level playing field, allowing others to come in and generate power. That act was put in place in 2006 and…this is an important
framework to attract new IPPs into the system.”

As far back as 1997, government created an independent regulatory agency, the Public Utilities Regulatory Commission (PURC) to set tariffs, initiate policies and generally encourage competition in the sector. And then there came the Ghana Grid Company (GRIDCO), a public sector energy enterprise incorporated in 2006, to power electricity delivery in Ghana. Its advent is seen to have provided a legal and commercial basis for private sector power generation.

Following the government’s creation of enabling investment environment IPP’s participation in the sector is, nonetheless, inching up gradually.

According to the Research and Markets projection, their participatory share will see an increase “from 19 percent in 2000 to 31 percent of total power generation capacity in the country by 2013.”

Despite the cost of thermal power generation, its introduction has come to diversify Ghana’s energy sources, deemphasising the erstwhile traditional dependence on Akosombo and Kpong’s plants with their peculiar susceptibility to climatic fluctuations.

That notwithstanding, it is still estimated that a greater percentage of Ghana’s electricity power supply still come from hydro sources.

 

The Volta River Authority (VRA) established on April 26, 1961, under the Volta River Development Act, Act 46 of the Republic of Ghana, with the core business to generate and supply electrical energy for industrial, commercial and domestic use in Ghana, has built a number of diesel and crude oil-fired thermal plants – like the Aboadze and Kpone thermal plants – to back up the hydroelectric power plants and to meet increasing power demand.

To reduce the high cost incurred through the thermal power generation, Ghana, alongside its West African neighbouring States of Togo, Benin and Nigeria, with the backing of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), invested in the West African Gas Pipeline (WAGP) to supply power plants in the country with cheap natural gas from Nigeria.

This investment necessitated the building of gas-fired thermal plants (Aboadze, Kpone and the Domunli (still under construction in the Western Region power plants) with the aim of having thermal power generation as the main source of electricity power for Ghana in the immediate future. Of course, these investments are also made with the added expectation of gas harvest from the newly discovered Jubilee offshore oil field.

Unfortunately, as much as these concerted efforts are being made to meet Ghana’s most crucial developmental need, the incidence of the rupturing of the West African Gas Pipeline occurred to cause a severe setback in government’s plans. Gas supply was disrupted and this, consequently, affected electricity generation thus plunging the nation back to the era of load shedding and incessant power outage. This is aside from the impact it is having on government’s budget as an unplanned expenditure in the purchase of petroleum for powering the thermal plants.

Granted that WAGP authorities have said that full supply would be restored by December at the satisfactory conclusion of repair works on the damaged pipeline yet, it appears that the assurance is hard to believe because of failed deadlines in the past. Hence, the public have been given different and conflicting dates by different government officials on the expected time electricity supply would be restored to normalcy.

Early in the month of November, at an interaction between the VRA Chief Executive and senior editors, Mr. Awotwi reiterated his assurance that the end of load shedding and power supply interruptions were nearly at hand.

The journalists were told that the repair work which began on the damaged WAGP pipeline in September was nearing completion and that Gas was expected to start flowing by the end of this.

Further details spoke of all six units in Akosombo running at full allowed capacity, as well as the three units in Akuse which were running at full allowed capacity.

 

While one unit in Akuse was out for emergency repair work, all four thermal units in Aboadze were reported to be running at full capacity, including the Steam turbine in Aboadze which was running and producing 50 MW of power.

“Total available capacity now is 1601MW. Peak demand now is 1705MW, leading to a deficit of 104MW,” according to VRA’s report which was presented to the Editors.

The report said that Takoradi 3 (T3) is running with 21 MW of power available, and expected to ramp up to 80 MW by the end of November, and that “CENIT is expected to run by mid-November, once it gets crude oil. Full capacity of these two projects is expected to add a total of 240 MW by year end.” With an assurance that there was “sufficient crude oil to run plants in Aboadze.”

“Ghana has been hailed as “The Gateway to Africa”,” the politician and energy expert, Goosie Tanoh, had said at the last, 3rd Policy Fair Dialogue Series last April.

“Over the past decade alone, we have witnessed the burgeoning growth of some very important industries. Our communications network is now one of the best and most affordable in Africa. Our roads and transport system, although still work is in progress, has seen some massive expansion in recent times. Even the educational sector has enjoyed some much needed boosts lately and is churning out more skilled manpower than ever before.
“There is however, one major area in which this country has been slow to achieve the desired growth. Sadly, this is also one of the most fundamental catalysts to any country’s rapid industrialisation and subsequent development. I speak of course, about Ghana’s Energy Sector with particular reference to electrical power generation, transportation and distribution.”

Those words echo today with reverberations that appear to be probing any claim to great achievement in meeting the nation’s dire need for electric energy. Really, the situation is a question of check and balances. Thus, one could say that, in the past four years government appears to have made efforts to see that it met its own set goals in making electricity power supply available to Ghanaians yet, if today, both homes and industry are still being denied constant supply of the same electricity power, would one find justification in concluding that the nation’s electricity need has been met? In the recent Association of Ghana Industry’s Business Barometer, poor power supply emerged as the topmost
constraint to the growth of businesses in Ghana.

“According to the respondents, the combined effect of frequent power outages and regular power surges from July-September, 2012 has resulted in an increase in the unit cost of production.” That is how worrisome the power supply situation has become firing the hope that government would, as a matter of urgency, facilitate VRA in all ways possible to meet the country’s need for electricity “if the country is to attain upper middle income status in the next three years.”

Property market faces brighter growth prospects

Real estate investment is drawing millions of dollars into the Ghanaian economy, thereby filling in the infrastructure deficit and providing
better prospects for growth.

The skyline of Accra is beginning to reflect the image of an oil exporting middle-income country. Since the rebasing of Ghana’s Gross Domestic Product (GDP) from 1993 to 2006, per capita income changed from under US$800 to US$1,318. As Ghana’s economy has grown, so has the demand for high quality residential property.

“There is a persistent need for sustainable, high quality real estate in Ghana but too often, buildings remain unfinished because of a lack of capital and development expertise,” noted Carlo Matta, the chief executive officer of Laurus Development Partners, a new entrant to the property market in Ghana.

Neither the Ministry of Water Resources, Works and Housing or the Ghana Real Estate Developers Association, keeps accurate and current data on housing needs in Ghana.
But anecdotal evidence estimates annual shortfall at about 30,000 units.

Mr Matta, who heads Laurus, a company incorporated in Ghana in 2009 believes that the trouble with the country’s real estate industry is the lack of synergy between the property market and the financial sector.

“I think there is a huge housing deficit especially in the mid and lower segment in Ghana. Obviously, there is no proper mortgage industry. But the problem will be solved by increasing the supply and also by being able to support the development of the xvideos.com mortgage industry.”

“Obviously for us it is an interesting sector and we are exploring it actively and hope in the near future to be able to launch mid-income housing projects in Ghana,” he said.

According to data gathered by the Ghana Investment Promotion Centre, the real estate industry is an alluring sector for foreign investors as it promises high investment returns.

However, most of the housing units on the market are targeted at high-income earners and Ghanaian returnees with price tags of villas recorded as high as US$500,000 on average.

“We are not looking at the high-end market in the immediate future. We think that it is a market that is already crowded so we think a better opportunity for us is mid-income housing units where there is a huge and unsatisfied demand,” collegeporn.net Mr Matta.

For now, Laurus is focused on challenging the status quo and developing environmentally sustainable, large-scale residential and commercial properties.

The firm will soon begin the construction of a US$60 million office space complex at Airport City, one of the fastest growing commercial districts in Accra. With the address of ‘One Airport Square,’ the project was designed by the award winning Italian architect, Mario Cucinella. It comprises shops and offices and is expected to create jobs.

The 17,000 square metre multi-storey complex scheduled to be completed in 20 months is envisaged to become a hub for visitors from around the world and will allow Ghanaians to enjoy the same world-class working and leisure experience as they would overseas.

“The buildings we develop are conceived and designed to be relevant not only today, but in the next 20 or 30 years. It is very important that we show this long-term commitment to Ghana,” he said.

Carlo Matta, CEO of Laurus Development Partners and Amanda Jean Baptiste, Director of Real Estate of Actis,
unveil One Airport Square project in Accra

“The buildings we develop are conceived and designed to be relevant not only today, but in the next 20 or 30 years. It is very important that we show this long term commitment to Ghana,” said Mr Matta

Laurus draws its financial power from Actis, a project investment company, which partly owns the landmark Accra Mall shopping centre. Actis provides Laurus with the financial muscle to deliver complex, long-term projects in the challenging West African business environment.

“The Accra Mall and One Airport Square are very different products and projects. I will say Accra Mall was good encouragement for us because it was very successful and became a landmark in Accra. Definitely, One Airport Square follows a completely redtube.com logic because it is an office building. We want to build quality buildings and quality does not necessarily mean luxury, but rather it means doing the right thing, all the time, no matter where you are building,” Mr Matta said.

Actis, which has so far invested more than US$150 million in the real estate industry in Africa, believes that its involvement with Laurus Development Partners will give the company a stronghold on the continent and an additional footprint on Ghana’s property market.

The Director of Real Estate of Actis, Amanda Jean Baptiste explained that the company aims to double its real estate investment in the next five years and wants to use Ghana as a launch pad to control the real estate beeg.com market in West Africa.

“Ghana is of course key to our strategy. For Actis, Ghana was the obvious choice for Laurus’ base. Accra is fast becoming the business hub of the region with a flourishing economy and
growing numbers of multinationals choosing to locate here.”
“We see great demand for office and leisure facilities. This is what Laurus will deliver,” Ms Baptiste said.

“The key driver for our entry into the real estate market is our recognition of the increase in consumer expenditure in this market and the need for retailers to formalise value chain offerings.”

“Everyone expects to walk into a modern shopping centre wherever we are in the world. We have done so with the Accra Mall and the Palm Shopping Centre in Lagos. We are also developing the Ikeja City Mall right now. So we want to replicate what you see youporn.com everywhere else in the world – it should be here in Africa and it should be here in Accra,” she added.

“We expect to invest another US$80-100 million in Accra in the next five years and critical to that strategy is setting up Laurus Development Partners. Laurus is our key factor in realising our vision,” Ms Baptiste said.

“We see the need to build multi-purpose office space in sub-Saharan Africa and we think the market is right for us to do this in Accra,” she said.

The Airport City project was conceived about two decades ago as part of the Ghana Gateway programme.

The area has so far attracted multimillion dollar investments and the presence of the country’s top banks, hotels, and telecom and auto companies is gradually turning the area into a prominent multiplex.