We disagree with the American position that contract security should be the primary concern of the government. But we fault the government for the processes that led to the formation of PDS after Meralco won the tender. That process was opaque, poorly thought through and badly regulated/governed. If we wanted 51% local participation in the Special Purpose Vehicle set up to manage the concession, we should have ensured quality, transparent and well thought through process subsequent to the international competitive tender.

The $190m MCC money supposedly lost was not free money for Ghana. It was meant for investment into the grid under a particular regime. With the termination of the arrangement, Ghana simply needs to find other partners willing to invest in the grid. The problem was that the current PDS group have no capacity to invest the $650 million needed to ensure appreciable improvements to the quality of service and loss minimization. So what is the point of $190 million when the bulk of investment resources required remain inaccessible?

What is required is a strategic partner with the muscle to invest roughly $650 million to truly modernise the grid. Staying with PDS in the hope of securing $190 million does not help us achieve that goal. Note: the $650m is based on the following elementary analysis. In the compact, the US is supposed to invest ~$500m. The private partner about $ 580m. That suggests modernisation costs of $1080m. We believe the real cost is closer to $1.2 billion, hence the $650m figure.

This is however not to endorse the government’s actions as a whole. We fault the government’s role in anointing PDS following a shambolic local content farm in the process that it supported throughout when it shouldn’t have. We are just saying that having got to this messy place as a result of the government’s actions, the termination was the least problematic of the options available. 

We also don’t accept the view that PDS principals should be prosecuted. It is obvious that their problem was a lack of capacity and resources, which led them to rely on insurance brokers and other advisors of rather questionable quality. That’s not a crime. It was the Government that should have ensured that this not happen in the first place.

Devolving the responsibility to the IFC is no defence since the IFC’s terms of reference did not include assessment of the capacity of the local content policy the government instituted. They were limited to technical analysis of the structure of the deal. And whilst we don’t believe that the advice proffered by the IFC was stellar or excellent, the ultimate responsibility for designing the local content farm-in strategy completely lies with the government of Ghana.

It is important to also point out that so long as the PURC remains a politicised institution packed with regime friendly appointees instead of a highly professionalised, technocratic, regime that is focused only with technical standards regulation, consumer rights  dispute resolution and adjudication among the utilities, anti-competitive behaviour, and corporate governance, with tariff setting based on a transparent technical formula, we shall not find a strategic partner willing to put in the considerable investment required.

If we also want local content, then we need to institute a competitive and transparent process for all local investors to participate in a process of price discovery. 

The government’s preference for backroom dealing, exemplified by its proposal to use restricted tendering to select new partners, after all that has happened, is completely needless. This posture should change completely. We are tired of botched utility reform projects in this country.