Ghana’s power sector top priority on second MCC – Patrick Fine

Ghana’s power sector will receive a higher part of the funds from the second US-run Millennium Challenge Compact (MCC) if a final decision is taken by Millennium Challenge Corporation (MCC) Board of Directors on the country’s eligibility for the funds in December this year.

In August 2006, Ghana signed for the first compact for an amount of $547 million, making it the third biggest beneficiary of the compact in the world after Tanzania ($698 million) and Morocco ($697million), according to the MCC’s website.

The five-year compact came into force February 16, 2007. The agricultural sector was the main focus followed by the transportation sector as well as rural development.

In January 2011, Ghana was reselected with two other countries for the second compact.

According to Mr Patrick Fine, Vice President of the Corporation, the government of Ghana has identified the power sector as the priority constraint to tackle after a constraint analysis was done for the compact early this summer by a team of Ghanaian and US economists.

“We are in conversations with your government around the development of the compact. A constraint analysis was done early this summer to look at the economic constraints. That was done by a team of Ghanaian and US economists. The next step is – the government of Ghana has identified the power sector as the priority constraint to tackle,” Mr Fine told reporters in Accra October 27, 2011 during his visit to Ghana.

He adds, “The government must submit to us a concept paper which is the first step in defining what the investment programme will look like” early 2012 before the first compact ends February 15, 2012.

He noted that Ghana’s reselection for the compact will be reviewed in December this year.

The US President, Barack Obama, in his 2012 Fiscal Year budget, requested $1.125 billion for the MCC, which Mr Fine told the US House of Representatives Committee on Foreign Affairs Subcommittee on Africa, Global Health, and Human Rights on May 10, 2011 that the requested funds would enable the Corporation to sign compacts with Ghana and Georgia, as well as fully fund a compact with Indonesia.

As to whether Ghana can get more than it had from the first compact, Mr Fine explained that it might depend on the programme design for the money as well as other factors since the request is still at the US Congress.

“It will depend on the programme design and bunch of factors. The request is before Congress and we don’t know what our final appropriation will be…and if you follow American politics there are a lot of wranglings over the US budget right now and a lot of concern about the budget deficit – so we don’t know what our final numbers will be. I think in six months we will be able to give you some estimates.”

Already the grand total of investment required for Ghana’s energy sector is $13.2 billion, a document from the Ministry of Energy (MoEn) obtained by ghanabusinessnews.com in October this year shows.

These investments are needed in the two key areas of the energy sector – that is the oil and gas industry as well as the power sub-sector, the document indicated.

The document indicated that the power sector needs about $4.2 billion, noting that $1 billion is needed to increase capacity of the country’s power generation with $700 million needed for the upgrade, expansion and establishment of new bulk supply points in the power transmission area.

Power distribution, including expansion, extension, voltage improvement, technical losses reduction project requires $1 billion and the National Electrification Programme involving grid extension, renewable projects; solar PV, wind & mini hydro requiring $1.5 billion investments, the document says.

Ghana is sourcing for $300 million from the Millennium Development Account (MDA) to fix the irregular and insufficient power supply challenges facing the country, the Daily Graphic reported October 20, 2011 citing the Country Director, Department of Compact Operations of the Millennium Challenge Corporation (MCC) of the United States of America (USA), Mrs Deirdra Fair as announcing at a workshop dubbed “Ghana and Mozambique; A Closer Look at Power Sector Development” during the US-Africa Business Summit 2011.

According to the publication, the funds are expected from the country’s share of the second compact of the MDA.

This is to enable Ghana to construct a 400 megawatt thermal plant in the next three years to reduce the over-reliance on hydropower generation, says the publication.

By Ekow Quandzie

Listen to Mr. Fine on attached audio. [audio:http://www.ghanabusinessnews.com/wp-content/uploads/2011/10/Patrick-Fine-on-MCC.mp3|titles=Patrick Fine on MCC]