The government statement was scanty but additional details on the issued has emerged that officials of PDS allegedly presented fraudulent documents to win the bid to manage the Electricity Company of Ghana.
An enquiry into the fiasco both within the country and outside the country has been launched , according to the Minister of Energy, Mr John Peter Amewu. The enquiry, he says, would among other things, establish who made false representation to the government to drive it into the agreement.
The enquiry is expected to end within 30 days after government dispatched a delegation to Qatar to ascertain some facts relating to the documentation on the agreement.
PDS has sought to down play any wrongdoing on its part, saying it had “always acted and would continue to act in good faith at all times” and assuring that it would go through due process “by complying with the terms of the transaction agreement executed between it and the Electricity Company of Ghana, on one hand, and the government, through the Ministry of Finance, on the other.”
The government claim to fraud on the part of PDS, stems from the fact that the company made fraudulent payment guarantees to ECG. In addition, the lack of both technical and financial muscle of some partners in the consortium that forms the PDS were the main issues that led to suspension of operations for the power distributor on Tuesday, July 30, 2019 by government.
How did we get here?
It all begun when Ghana and the United States of America signed the Millennium Challenge Compact (MCC). There was the MCC-I which was used to construct the N1 Highway (now known as George Bush Highway) under President John Kufuor and the MCC-II under President John Mahama.
The MCC-II dubbed the Ghana Power Compact, sought to double access to power on the African continent—with the Government of Ghana. The Compact invested up to $498.2 million to support the transformation of Ghana’s electricity sector and stimulate private investment.
One of conditions attached to MCC-II was for Ghana to privatize the management and operations of Ghana Electricity Company (ECG).
On August 5, 2014, Ghana signed the Compact II agreement with the Millennium Challenge Corporation in the US. The then Finance Minister, Seth Terkper, signed the agreement on behalf of Ghana.
The agreement made available to Ghana an amount of $489 million to be invested in the power sector over a period of five years. In Ghana, the body in charge of the disbursement of the funds was the Millennium Development Authority, MIDA.
However, before Ghana could get the first tranche of the money, the government needed to meet some condition precedent which was to open tender for the privatisation of ECG. On August 30, 2016, the tender documents were released.
The then Mahama administration opted for the concession model which will see the assets of ECG given to a private company. The company will invest, operate and manage ECG for 25 years.
As part of the original agreement, the concessionaire will not be able to dismiss, rationalise or cut the staff strength of ECG until after five years. This provision agitated staff of ECG, resulting in then candidate Nana Akufo-Addo promising to review the agreement should he win the 2016 polls. In addition, the original agreement had a shareholding structure of 20 percent local content and 80 percent foreign content.
Ghana, through MiDA, received bids from about 20 companies to manage ECG. This number was reduced to seven. Having opened and received bids, the second tranche of the money was released on September 6, 2018.
President Akufo-Addo, upon assumption of office, reviewed the privatisation of ECG. Among other things, he shortens the lifespan of the agreement from 25 to 20 years. In addition, the concessionaire could no longer sack workers of ECG after five years as was captured in the original agreement.
On the shareholding structure, the Akufo-Addo administration changed it to 51 percent local content and 49 foreign content. As a result, five of the shortlisted companies withdrew, leaving only two: Meralco and BXC, Chinese company.
Later, MiDA, which works under the Office of the President, in a statement disqualified BXC and so Meralco eventually won the bid to manage ECG for 20 years.
The concession came into force on March 1, 2019, however, for such an international agreement to take effect, Ghana had to meet the condition precedent of the agreement which is to clear the debt of ECG. In the books of PDS, they only inherited assets.
On the part of PDS, they met all the condition precedent but the guarantees, which has prompt government to accuse it of fraud.
The debacle between the government and PDS is so serious it shouldn’t be treated as one of the usual scandals in government. So many people have questions to answer.
What legal opinion did the Attorney General offer in the whole agreement. It is obvious for me that the AG’s office did not do any proper due diligence before allowing the deal through.
The Finance Minister and the Energy Minister for me, also have questions to answer.
Government’s decision to launch a full-scale enquiry into the matter is good news but groundless. We are never going to know whose negligence caused this embarrassing episode.
So, before the report comes to the president, it is dignifying, and respectful to the citizens, for people to accept tentative blame and resign or be dismissed by the president.
We know those to be held responsible. They are in the Finance Ministry, Energy Ministry and the Attorney General’s office.