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Home General News

Electricity tariffs to reduce further; NPP promises in 2020 manifesto

Daily Statesman by Daily Statesman
September 3, 2020
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Electricity tariffs to reduce further; NPP promises in 2020 manifesto
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The governing New Patriotic Party (NPP) says the cost of electricity will significantly go down again, should the Akufo-Addo administration be retained in the December 7 elections.

According to the party, it will implement measures to significantly reduce the cost of power and make it the most competitive in West Africa for industrial use.

It says that in particular, the party will among other things reduce the cost of power through review and restructure of Ghana’s energy-mix to generate cheaper sources for industries, including gas and renewable energy; complete the re-negotiation of the existing power purchase agreements to reduce the take-or-pay commitments and the excess capacity charges that translate into higher power tariffs; rationalise the fuel-mix for thermal plants on the basis of cost efficiency and improve efficiency by cutting down the technical and transmission losses of the Ghana Grid Company (GRIDCO) limited and the Electricity Company of Ghana (ECG).

“These operational and inefficiency losses also translate into their high revenue requirements, which then mirror into high tariffs to households and businesses,” the party stated.

Constraints of private sector

According to the NPP in its 2020 manifesto, launched last Saturday, the high cost of power in the country, among other challenges are the longstanding, key constraints to the growth of the private sector in Ghana.

The party noted that other constraints to the Private sector include access to, and cost of finance, and the business environment.

To tackle the constraints with access to, and cost of finance, the party intends to achieve its ‘Ghana Beyond Aid’ vision along the core economic clusters it has envisioned and an increasing reliance on public-private sector arrangements.

“Our strategic objective is, therefore, to provide the financial and related muscle that our Ghanaian-owned businesses need to be successful,” the party stated.

Addressing private sector constraints

To address this, the next NPP government will reduce the risk of lending by leveraging on technology to reduce information problems between lenders and borrowers.

“The introduction of the National Identification card and Digital Addressing System should pave way for an improvement in the operations of credit bureaux, leading to a de-risking in lending and reduction in default premiums charged by banks.”

The party will further restructure and redirect existing funding arrangements such as the Venture Capital Fund and the National Entrepreneurship & Innovation Programme (NEIP) by redirecting their focus and to optimise better the use of funds to achieve better results; replenish the funding of the restructured funds and institutions, and use them to crowd-in private sector funds.

Again, the NPP will use preferential tax regimes and first options on Government of Ghana-funded projects to direct projects to private sector businesses and complete the establishment of a new Development Bank for Long-Term Capital Mobilisation.

Filling financial gap

The party contends that a critical gap in financing large-scale industrialisation and agricultural projects is the lack of domestically-managed long-term capital sources. To address this gap, the NPP will complete the establishment of a new, non-deposit taking Development Bank to mobilise long-term domestic and foreign capital to fund agricultural and industrial transformation objectives.

The Bank, according to the manifesto, will operate as a Wholesale Bank.

Further to this, the next NPP government will leverage Foreign Debt-Financed Projects to Support Domestic Capital Formation.

Most international commercial loans for infrastructure projects often come with a contractor/service provider from the lending country to partner with a local sub-contractor. The loan conditions often include tax waivers for the international contractor that does not extend to local contractors.

The effects of this arrangement are that it subsidises the international contractor to the detriment of Government and local contractors; often does not allow Government to assume ownership of equipment used on projects for which it pays through the loan and exemptions from taxes, and, more importantly, limits the capacity of indigenous, Ghanaian-owned businesses to access capital, experience and competitiveness with which to execute later projects in Ghana or internationally.

“Under the next government of President Nana Addo Dankwa Akufo-Addo, our first option to finance infrastructure projects would be non-EPC tied structures, including using specialist funds like municipal or diaspora bonds.

“Where non-EPC tied structures are not available, we will prioritise partnerships in which equipment bought for and paid with part of the loan will be well-maintained and transferred to Government. The equipment will be placed in a Plant Pool from which indigenous, Ghanaian-owned businesses can rent at subsidised rates for local and international projects,” the party said.

The party will further scale back Government activities, which crowd out the private sector; continue to ensure that the financial sector is strong, competitive, and resilient, and able to provide the necessary financing in support of private sector growth; continue to issue long-dated bonds to set benchmarks for, and enable corporate growth; exempt prospecting and reconnaissance by mining firms from VAT and other taxes, to incentivise investment in exploration activities to delineate ore bodies as a means to ensure a pipeline of mining projects; complete the process of fiscal reforms in the mining sector and “enact the Minerals Revenue Management Act, similar to the Petroleum Revenue Management Act, using the Minerals Income Investment Fund Act, 2018 (Act 978), which we passed as the foundation.”

Tags: 2020 manifestoAkufo-Addo administrationElectricity Company of Ghana (ECG)Ghana Grid Company (GRIDCO)governing New Patriotic Party (NPP)
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