Business News of 2014-08-07

2nd MCA Compact will help achieve energy for all - Mahama

President John Dramani Mahama has said he is optimistic that the second compact of the Millennium Challenge Corporation (MCC) which the MCC has signed with Ghana will provide the necessary fillip for his government to achieve its ‘energy for all’ objective.

Speaking at the signing of the compact in Washington, DC, on Tuesday night, Mr Mahama said the fact that millions of Ghanaians would benefit from the agreement indicated that his vision for the energy sector was on course.

The Ghana Power Compact, described as the largest US Government-funded transaction of President Obama’s Power Africa Initiative, will result in the investment of $498.2 million to support the transformation of Ghana’s electricity sector and stimulate private investment.

Under the arrangement, Ghana will make an added investment of $37.4 million to bring the total investment to $535.6 million.

The compact, which is for five years, is designed to create a self-sustaining energy sector in Ghana by reforming laws and regulations needed to transform the sector.

President Mahama, who is in Washington, DC, to attend the first US-Africa Leaders Summit, and the US Secretary of State, John Kerry, witnessed the signing of the compact.

The Finance Minister, Mr Seth Terkper, and the Chief Executive of the MCC, Ms Dana J. Hyde, signed for Ghana and the US, respectively.

The signing of the second compact followed three years of preparatory work, with particular emphasis on Ghana’s priorities.

After the signing ceremony, the MCC posted on its website that the Ghana Power Compact was expected to catalyse more than $4 billion in private energy investment and activity from American and global energy firms in the coming years.

The first compact saw the release of $547 million to Ghana to undertake strategic investments in the infrastructure and agricultural sectors to reduce poverty.

It resulted in the construction of the N1 Highway and the provision of economic opportunities for over one million Ghanaians in the agribusiness value chain over a period of six years.

In January 2011, Ghana was declared eligible for a second compact after successfully executing the first.

Under the second compact, the MCC will make an initial investment of $308.2 million, including funding to put the Electricity Company of Ghana (ECG) on a sustainable path, and upgrade infrastructure to reduce outages and improve service.

The second tranche of $190 million will, however, be made available if Ghana accomplishes a set of reform targets set forth in the compact.

One of the reforms is the introduction of private participation in the management of the ECG, a policy that has already received mixed reactions from Ghanaians.

A key aspect of the second agreement, titled, ‘Access Project’, will ensure that about $10 million of the amount is devoted to the expansion of electricity access to small and medium enterprises.

“Thousands of micro, small-and medium-size businesses in Ghana, many operated by women, do not have legal access to electricity. The MCC compact will also provide funds to reduce the barriers to legal connections for these enterprises,” the MCC said in a statement.

President Mahama stated at the signing ceremony that the new compact with the MCC was a clear demonstration of the growing cooperation between Ghana and the US.

Ms Hyde said the investments to be made would provide Ghanaian homes, schools and hospitals with access to the reliable electricity they needed to thrive.

“This agreement represents a major milestone in the US-Ghana partnership and I want to thank both teams — from Ghana and from the MCC — who worked tirelessly to develop this investment aimed at overcoming one of Ghana’s key constraints to economic growth,” she said.

She welcomed the decision by Ghana to continue to make critical policy and regulatory reforms in the power sector.

“In Ghana, the MCC has chosen a partner who is committed to economic growth. I applaud the Mahama administration for its courage and steady conviction to take on bold reforms that will lead to opportunities for millions,” the MCC boss said.

In a brief statement, Secretary Kerry congratulated Ghana on successfully going through the process for the compact.

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