Ghana's energy sector inefficiencies are costing the nation an estimated GHS 40 billion annually, according to Ben Boakye, Executive Director of the African Centre for Energy Policy (ACEP). This substantial financial drain is not only worsening public finances but also deepening social inequalities among citizens.
Mr. Boakye's warning comes amid growing controversy over proposed reforms for the Electricity Company of Ghana (ECG). He stressed that the country already understands the core problems. The focus must shift to implementing solutions rather than continuously funding the consequences of a broken system. Organized labour, including the Trades Union Congress (TUC) and the Public Utilities Workers’ Union (PUWU), has raised concerns regarding these reforms.
This situation fits into Ghana's broader economic narrative of fiscal challenges and debt accumulation. The government frequently relies on borrowing to meet its obligations. This includes payments to independent power producers (IPPs) and covering fuel costs for electricity generation. Ghana has issued cedi-denominated bonds domestically, sometimes at interest rates exceeding 20 percent. It has also turned to Eurobond borrowing to finance these recurring energy sector expenses.
Ben Boakye, speaking on JoyNews’ Newsfile, highlighted the true scale of the financial burden. He stated that the GHS 3.5 billion in annual government spending on the sector is misleading. He pointed to ECG's losses, which exceed GHS 20 billion annually. These losses are ultimately absorbed by the national budget, creating a significant fiscal hole. Mr. Boakye cautioned that even the GHS 20 billion figure does not fully capture the country's total commitment. When combining interest costs on borrowings with ECG's recurring debts, the total annual cost approaches GHS 40 billion.
The implications of these inefficiencies are far-reaching. Ordinary citizens are effectively paying for these energy sector debts through public finances. Yet, many of these same citizens still lack reliable access to electricity. This creates a cycle where taxpayers shoulder an increasing financial burden. They do not necessarily receive commensurate improvements in electricity services. Decision-makers must address this fundamental inequity. The energy sector's financial problems pose an existential threat to the national budget. The cost of inefficiency reinforces existing inequalities.
Mr. Boakye also addressed concerns about private-sector participation in ECG. He rejected the idea that greater private involvement means the state loses control of a strategic asset. He argued that ownership and regulation are distinct issues. The state remains the ultimate regulator of all activities within the country. He emphasized that the central consideration should be efficiency. Any proposed arrangement must deliver greater efficiency and resolve the electricity distribution sector's problems. The debate should focus on identifying the right institutional and commercial structure. This structure must effectively address ECG’s financial and operational challenges. The ultimate test for any reform is its ability to reduce waste, improve efficiency, protect consumers, and ensure financial sustainability. It must also ensure the state retains effective regulatory oversight.