Business News of 2014-08-14

Efficient power distribution will transform economy – MCC

The Ghana Country team lead for the Ghana Compact II, Diedra Fair James, says the team is focusing on distribution in the energy sector because efficient distribution will boost economic growth as well as reduce the challenges in the power sector.

Speaking on the Citi Breakfast Show, Diedra James, said the decision was taken after studying the previous compact undertaken by the Millennium Challenge Corporation (MCC) in Ghana.

“One of the things we recognised was important is to understand, from the beginning, what the binding constraints to [Ghana’s] economic growth were, she said.

She revealed that once power was identified as the “binding constraint to Ghana’s economic growth, exercises were done to determine the root causes of the problem.”

“Bringing together experts, consumers, businesses and other stakeholders, we kept coming back to the same issue that we need to focus on addressing some of the challenges in the distribution sector,” she explained.

According to Madam James, the distribution sector affects all aspects of the economy, including how the consumer's experience power, and impacts investments in the transmission and the generation of power.

She said that “after talking to several actors in the energy sector,” it was evident that the distribution of power was a key factor in correcting anomalies in the country’s ailing economy.

“Because of the challenges we found, we knew it was important to address that critical link in the chain and that was the Electricity Company of Ghana.”

She stated that the distribution of power was, however, not the only factor preventing the “big companies” from investing in the generation sector.

“There’s also fuel. But even with the fuel it is important for fuel suppliers to know that they are going sell to a generator who will be able to sell down the chain and get their money back so they can pay the suppliers.”

Meanwhile, the National Coordinator for the Ghana Compact II, Prof Samuel Sefa-Dedeh, told the host of the Citi Breakfast Show, Bernard Avle, that focusing on power generation had been considered.

He revealed that the original concept that was presented to the MCC intended to establish a “free zone for power generation.”

However, “the resources from the MCC were not large enough to even construct one plant and therefore we had to be strategic,” hence the focus on power distribution instead.

He believes that many people “shy away from” the distribution sector and that “hard decisions must be taken to reform the sector and make it more efficient.”

Ghana signed a Power Compact deal with the United Sates that will invest up to $498.2 million to support the transformation of Ghana’s electricity sector and stimulate private investment.

The five-year compact has been designed to create a self-sustaining energy sector in Ghana by reforming laws and regulations needed to transform the country’s power sector.

The Ghana Power Compact is expected to catalyze more than $4 billion in private energy investment and activity from American and global energy firms in the coming years.

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