The Government of Ghana has reportedly cancelled the contract with Power Distribution Services (PDS) with Electricity Company of Ghana (ECG). Debates on cancellation of the PDS contract has been in the public domain for sometime now.
BACKLASH OF CANCELLATION OF PDS CONTRACT
This is in spite of the US government’s disagreement to the cancellation and the potential total loss of almost $1.7 billion to the government. The $1.7 billion is a total of $700 million from the US government and $1 billion from the World bank. These monies were on the basis of the PDS-ECG contract.
Though the cancellation of the PDS-ECG contract could additionally blacklist Ghana with the US, the development would be welcomed by majority of Ghanaians. The US government has insisted that the deal be not cancelled but that the international investor be replaced. MIDA being the brokers has reportedly indicated its displeasure for the cancellation.
CALLS TO CANCEL
Before this moment there have calls by a large number of Ghanaians to abrogate the contract on the back of fundamental and material breaches. In July this year, the government suspended the contract on the basis of guarantee breaches to the contract. The saga was on the basis of the international organisation holding 49% shares failing to present the required guarantee as well as the Ghanaians holding the 51% also failing to show the financial capacity to hold the equity.
There have been vitriolic calls from some technical persons and entities as well as the opposition NDC party to cancel the contract. With the contract smacking of reported irregularities, breaches and corruption, the President’s decision to cancel the PDS-ECG contract would be well appreciated.
Kofi Amoah, an energy expert, in an interview with an Accra-based media house agrees that the deal has to be cancelled. He is of the opinion that the PDS portion should be made to stay while the Ghanaians 51% should be packed away or prove their capacity to provide the needed equity making up the 51%. The 51% constituted $510 million to be provided over a 5-year period. He advised that the PDS part of the contract be made to stay on the basis that a full international tender was conducted. However, he advised that the government should do away with the Ghanaian portion of shares .
GTB also believes that in the interest of transparency, ethics and good value to the energy development of the country, the entire PDS-ECG relationship should be scrapped.
LOCAL & INTERNATIONAL SHARES
The Minister of Energy, Mr. John Peter Amewu, has indicated that 30% shares of the power distribution industry has been handed over to a new company. If this is true, it leaves 19% for an international investor to snap. The total equity slated for an international investor is 49% while Ghanaians should hold 51% shares.
FINANCING OF ENERGY SECTOR
The amount of monies as potential losses due to the cancellation were earmarked for the development of the energy sector. Considering that the whole PDS-ECG contract was based on the Millennium Challenge Account (MCA), any related funding might also be lost. With the likely cancellation of the PDS-ECG contract, the government would now have to look for the monies from other sources to invest into the energy sector.