Ghana’s capacity to generate energy for industrial, commercial and domestic use is in serious crisis because of the failure of mining companies, industries, ministries, departments and agencies (MDAs) to pay the huge sums of money they owe the Volta River Authority (VRA).
Akosombo Dam of the Volta River Authority, the VRA generates and supplies electrical energy for industrial, commercial and domestic use in Ghana (click to enlarge).
Figures available to the Daily Graphic put the current debt owed by MDAs to the VRA at GH¢90 million, while some mining companies also owe the authority more than GH¢15 million.
Energy crisis looms as VRA crawls on dwindling income was reported in Reporting Oil and Gas.
Furthermore, the VRA claims that it is compelled to sell power cheaper than the production cost, as a result of which what it obtains from loyal customers who pay their bills regularly is not enough to sustain its operations, a situation that has plunged the authority into a critical financial situation.
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As the big consumers and government agencies appear reluctant to meet their debt obliga-tions, the VRA is pushing for higher tariffs to enable it raise the needed revenue for the sustenance of its operations.Alternatively, it says it will require extra funding from the government for the sustenance of its operations and to prevent the situation from deteriorating further.
The government can pay its bills one way, or pay them another. Preferably the MDAs, ministries, departments, and agencies will pay their own bills, and itemize them in their budgets. Or the government can pay them in some other way, with subsidies or some other arrangement that must be clearly defined. But they must pay, and must be realistic about what they are paying and the VRA’s income and expenses. And the process should be transparent and visible to the public, who is paying, and who is not paying.
The mining companies have been brutal to people living in mining areas, displacing people, poisoning and destroying the environment. They most certainly should pay their bills. That is the least they can do for the country.
The Head of Public Relations at the VRA, Mrs Gertrude Koomson, put VRA’s loss at 50 per cent of its production cost and listed inflation and increases in crude oil prices as other factors contributing to the huge losses.
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“As things stand at the moment, there is no way the authority can continue to effectively serve the nation, since its revenues are not covering the cost of production,” she added.
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Mrs Koomson said the VRA believed that the time had come for the public to start paying the right price for electricity and went further to state that the authority had presented a proposal to the Public Utilities Regulatory Authority (PURC) and was awaiting its response.She observed that if the right price was not paid today to meet the cost of production, consumers might be compelled to pay much higher prices in future that is, if the system did not collapse completely.
I wonder exactly what Mrs. Koomson means by people paying the right price. Does she mean that the businesses and MDAs that have failed to pay should pay up their share? It sounds like the system is currently being sustained by the small rate payers while the big players are skating along free. Is she talking about charging the smaller rate payers more because the big guys don’t pay? If so, that has to change.
All those using power produced by the VRA need to pay their fair share. It is especially important for businesses and government agencies to show leadership and support, for the sake of both solvency and fairness. To do otherwise is a shift of wealth upwards from the poorer to the richer. It is also a shift from being functional to being dysfunctional, a path to certain failure. It is a bad way to do business, as well as being unethical and undemocratic.
It should be possible to bring some legal pressure to bear on the big players to pay their bills. In this regard Ghana may be suffering from the structural adjustments forced down its throat by the IMF and World Bank. Structural adjustments force governments to dismantle those parts of government that are particularly necessary for serving the general population, for building up a country, for creating jobs, creating a middle class, and achieving real independence. They are designed to leave a country at the mercy of predatory capitalism. World Bank and IMF aid and adjustments are designed to cripple a country’s ability to govern itself. For examples, you can look at the government and economy of almost every country they have “helped”. Ghana has certainly suffered its share.
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Akosombo Dam photo from marantzer on Flickr.
February 12, 2010 at 11:06 am
I presume what she meant by consumers paying the “right price” is answered by the article’s earlier statement, “the VRA claims that it is compelled to sell power cheaper than the production cost.”
Who determines the rates charged by the VRA? The VRA itself? Are those rates based on market forces or heavily influenced by political pressure to subsidize users? It sounds like the latter. If so, then first and foremost the VRA needs to charge customers AT LEAST the production cost of the energy they consumer. Furthermore, customers who fail to pay should be penalized, and eventually cutoff from energy. How quickly do you think the government would find a means to pay its electric bill if public hospitals, schools, and municipal buildings were suddenly without power? Same goes for private mining companies. Of course, if mining firms can not profit while paying all their costs (including energy costs) then the government must decide if it wishes to further subsidize those operations for the benefit of the employment it creates, but that’s a discussion for another time.
(great blog xcroc. keep it up!)
February 14, 2010 at 8:52 pm
Hi Michael,
You are absolutely correct that the VRA needs to charge customers AT LEAST the production cost of the energy. I was not certain if all the consumers were to pay their bills, particularly the big consumers, would that cover the cost of production? I’m inclined to think it might not be enough, from my reading of the article. Although I don’t have figures, and have not researched the figures on this. I think it was about a year ago there were terrible problems with power outages and it cost a lot of people jobs, and some people their businesses. Plus, unreliable power is not conducive to investment. And I’m sure corruption plays a part in the failure of the mining companies and MDAs to pay, and the failure to collect those payments. As Michael Watts points out: The most obvious way corruption hurts society is its neutralizing effect on public servants, be they police or politicians, or anyone in between. In this case they are the staff responsible for payments in the mining companies and MDAs, and those responsible for collecting for the VRA. I don’t wish to malign anyone unfairly, but I suspect this is part of the problem of getting the bills paid.