How much did Ghana lose over termination of PDS contract?

In recent days, the National Communications Officer of the National Democratic Congress (NDC), Sammy Gyamfi, has on two occasions claimed that Ghana lost $2 billion as a result of the termination of the Power Distribution Service (PDS) concession agreement.

In a press statement on February 12, he wrote that “Ghana lost 2 billion dollars as a result of this scandal according to the IEA.”

A week later, on February 19, at the NDC’s moment of truth press conference, he reiterated that “according to the Institute of Economic Affairs, Ghana lost $2 billion as a result of this scandal, which was orchestrated by Bawumia alone.”

What are the facts?

On August 5, 2014, the Government of Ghana signed a deal with the United States Government that required, among other things, that Ghana introduce private sector participation (PSP) in the operations of the Electricity Company of Ghana (ECG).

The U.S. government signed the deal, known as the Power Compact, through the Millennium Challenge Corporation (MCC).

The deal enjoined Ghana to allow a private operator to inject USD 580 million into ECG over a five-year period. This private operator was to be in charge of the retail and distribution business of ECG.

According to the original Power Compact agreement, private participation was to involve both foreign and local entities. The foreign entity was to hold 80 per cent of the shares while the local entities were entitled to a 20 per cent stake.

However, the Akufo-Addo-led government re-negotiated the shareholding structure to 51 per cent Ghanaian and 49 per cent foreign when it assumed office in 2017.

The government finally settled on three Ghanaian companies, and two foreign entities, which formed the PDS consortium, which started operations in March 2019. In July of that same year, the government suspended the company’s operations because of an issue with PDS’s Demand Guarantee.

Three months later, in October, the government terminated the contract, claiming that the Ghanaian companies presented a fraudulent Demand Guarantee.

The US government, through its embassy in Ghana, swiftly responded that the government should reinstate PDS. The U.S. government insisted that, regardless of what the government had found, the concessionaire should stand. The government of Ghana did not budge.

Through the Power Compact, the US had planned to make available USD498,200,000 to improve Ghana’s energy situation. As a result of the Ghana government’s insistence on not reinstating PDS and failing to ensure that ECG was privatized, as the Compact mandated, the US made it clear it will not release the second tranche of USD190 million to Ghana.

In a presentation in November 2019, the Director of Research at the IEA, Dr John Kwakye, said the US had cancelled several programs because Ghana did not privatise its power companies.

“Now we found that there was some fraud with the deal and the government decided to cancel it. The US said we need to reinstate it. And they [Ghana government] said no. And they [U.S. government] said, okay, if you are not doing that then you are going to suffer the following consequences,” Dr. Kwakye said.

“The remaining amount of USD190 million has been cancelled. There is also the cancellation of the concessionaire of USD 580 million. Apart from the Ghana Compact, Ghana was to benefit from a regional compact amounting to 400 million dollars; that has also been cancelled. And then, there is also a World Bank facility which is also energy-related going into the bracket of USD500 million. That has also been cancelled. If you add this all up you are getting close to maybe USD2 billion that we are going to lose.”

Dr Kwakye went on to say that the American government’s decision “demonstrated the extent” to which they are willing to go to “punish a country that they consider to be recalcitrant or wayward.”

“Is that fair? Don’t African countries have the right to choose the management structure of their strategic industries? Does it always have to be imposed on us from outside?” he asked.

When Fact-Check Ghana added the figures put out by Dr John Kwakye of the IEA the figure stood at USD 1.67 billion, which is about 330 million shy of USD2 billion.

In conclusion, Ghana indeed lost a significant amount of money as a result of the cancellation of the PDS deal. According to the IEA, the amount was close to USD 2 billion. The amount was lost not directly because of the “scandal” but because the U.S. refused to make certain amounts of money available to Ghana after the government objected to demands to reinstate PDS or continue with the privatisation of ECG.

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