A stinging audit has revealed that Ghana’s primary electricity distributor, the Electricity Company of Ghana (ECG), spent a staggering GHS 136 million ($10.4 million) on emergency fuel purchases in just three months, exacerbating the financial challenges plaguing the nation’s energy sector.
This alarming figure was revealed in a report by PricewaterhouseCoopers (PwC), which was made public this week, drawing attention to the severe financial mismanagement undermining Ghana’s power stability as a new administration takes charge.
The audit, covering the period between October and December 2023, revealed that the ECG made these unbudgeted emergency fuel purchases to prevent power outages. However, only GHS 18.2 million of these expenses were officially declared through proper channels, raising significant concerns over the transparency of the transactions. The remaining funds, approximately GHS 118 million, were spent without sufficient oversight.
The PwC report paints a troubling picture of the company’s financial management, with the auditors highlighting that the purchase of emergency fuel often comes at premium prices, further straining the ECG’s already limited resources. The report noted that these emergency purchases, though deemed necessary to avert power cuts, have been a significant drain on the company’s finances, diverting funds away from other critical obligations, including payments to independent power producers (IPPs).
Inadequate planning and poor inventory management were flagged as key contributors to ECG’s over-reliance on emergency fuel procurement. Additionally, the audit pointed to several issues, including a lack of standardized procurement guidelines, which heightens the risk of inefficiencies and financial mismanagement. Without clear protocols in place, emergency purchases often spiral into expensive, last-minute transactions.
Another significant concern raised by the audit was the lack of independent oversight over ECG’s operations. With no mechanisms to monitor these large expenditures, the report suggests there are serious questions surrounding the accountability and potential misuse of funds. The sheer number of ECG’s financial accounts — 84 accounts spread across 20 banks — also makes proper financial oversight a daunting task.
Perhaps the most alarming revelation of all is that ECG under-declared revenues by a staggering GHS 1.14 billion ($87.3 million) between October and December 2023. This discovery casts a shadow over the company’s financial transparency and raises red flags over the true financial state of the sector.
The timing of the audit’s release is crucial, as newly inaugurated President John Dramani Mahama faces the daunting task of overseeing the country’s energy sector reform. Mahama, along with his Energy Minister-designate, John Jinapor, has inherited a utility sector grappling with severe debt and operational inefficiencies. The findings come as a serious challenge to Mahama’s administration, which had pledged to prioritize reforms in the energy sector during his swearing-in.
In a further blow to the sector, the audit also noted that the financial strain from emergency fuel purchases has had a cascading effect on the Cash Waterfall Mechanism, which was designed to ensure fair payments to power producers. The strain on resources has delayed payments to IPPs, which in turn threatens Ghana’s energy generation capacity.
Ghana’s energy sector is already burdened with a debt exceeding GHS 8 billion ($612 million), and this figure continues to climb due to persistent inefficiencies. The PwC audit underscores the urgent need for reform within the energy sector, where financial discipline must be coupled with the imperative to maintain a reliable power supply.
For President Mahama, the road ahead will be fraught with challenges. While he faces mounting pressure to tackle the sector’s deep-rooted issues, the audit findings make it clear that bold reforms and stringent oversight will be required to restore financial health and energy stability to the country. As the nation grapples with its energy crisis, the need for reform has never been more urgent.