Energy consultant Solomon Sarpong has raised concerns about the potential privatization of the Electricity Company of Ghana (ECG), cautioning against a simplistic approach to solving the country’s energy sector woes.
According to him, on paper, private sector involvement seems like a good idea to solve Ghana’s power problem but argues whether private sector involvement in electricity distribution has ever achieved the desired goals elsewhere in Africa.
Speaking in an exclusive interview with the Ghanaian Publisher newspaper, Mr. Sarpong warned that privatization is not a guaranteed solution and emphasized the need for a well-structured framework to balance the interests of all stakeholders.
Drawing on examples from across the continent, Mr. Sarpong stressed the mixed outcomes of private sector involvement in electricity distribution in sub-Saharan Africa.
He cited Uganda and Nigeria as key examples, where privatization efforts have yielded disappointing results.
He said, “In Nigeria, the distribution sector has been more or less fully privatized, and it hasn’t gone well. In Uganda, privatization initially appeared successful, but a closer look reveals that the private sector only focused on the ‘juicy’ parts of the deal, leaving the government to bear the burden of less profitable areas.”
“They were, in essence, mocking the government,” he stressed.
According to Mr. Sarpong, the more stable electricity supply in North African countries is primarily due to government involvement, not privatization.
Addressing the broader challenges of utilities across Africa, Mr. Sarpong pointed out systemic issues such as low tariffs, inefficiencies in operations, and government interference.
According to him, utilities are struggling because of tariffs that are often lower than the actual cost of production and citing ECG as an example he indicated that the company collects revenue in Ghana Cedis, but much of its operational costs are in U.S. dollars.
Exchange rate fluctuations, he said, mean the company is already making losses before they even finish collecting revenue. He noted that political interference in tariff adjustments exacerbates the problem.
“Governments often resist tariff increases for political reasons, promising to absorb the difference. But they rarely pay, and this creates debts that cripple the utilities,” he said.
Electricity as a Social Good
A central theme of Mr. Sarpong’s critique of private sector participation is the nature of electricity as a social good. He argued that electricity is essential for everyday life and should not be treated solely as a profit-driven commodity.
“Electricity is a social good. It’s not just a commodity that people can make profits from. It has become such an integral part of our lives that even the less privileged must have access to it.”
“The private sector, however, operates on a profit motive, and this fundamental difference must be carefully addressed in any privatization deal,” he emphasized.
He warned that if privatization is pursued without proper planning, inefficiencies and costs could be transferred to consumers, especially those in rural and low-income areas.
“We cannot have a system where those who cannot pay are excluded. Tariffs must be affordable, and we need to ensure inefficiencies in the system are not shifted to the people,” Mr. Sarpong said.
While the energy consultant expressed scepticism about privatization, he acknowledged that it could work under the right conditions. The key, he said, lies in structuring deals that incentivize efficiency while protecting public interests.
“For privatization to succeed, the deal must be structured in a way that the private sector benefits from improving efficiency. For example, if electricity losses—currently at about 23%—can be reduced to 15%, and the gains are shared between the private sector and ECG, that’s a win-win,” he suggested.
He also emphasized the need to prevent private companies from cherry-picking profitable urban areas while neglecting rural regions.
Electricity, he said, is not just for cities and so if private companies are allowed to focus only on areas where demand and collections are easy, what happens to the villages and less developed areas? He stressed that any deal must ensure a balance between urban and rural access.
Concerns about government liability
Mr. Sarpong also raised another significant concern about the potential increase in government liabilities under privatization agreements. He warned that private companies often transfer risks to governments, creating financial burdens in the long term.
He said, “Private companies will insist on conditions that protect their profits. For instance, if electricity demand falls due to energy efficiency measures, the government may have to compensate for revenue shortfalls. This only adds to the debt on government books.”
He added that inefficiencies within ECG itself could be addressed without resorting to privatization. He argued that if government gives the same conditions to ECG that would be given to private companies, the company can achieve more.
“The issue is that we don’t push public entities to deliver the same way we do with private entities,” he said.
Mr. Sarpong called on the government to adopt bold leadership and a clear strategy to improve ECG’s performance without rushing into privatization.
“We need to inject efficiency and dynamism into ECG. Privatization alone won’t solve the problem. If countries in North Africa can manage their electricity sectors effectively without privatization, why can’t we,” he questioned.
He cautioned against repeating past mistakes and cited the Power Distribution Services (PDS) concession as an example, which faced significant challenges due to poor structuring and risk allocation.
“The PDS deal showed how a poorly structured agreement can lead to problems. We need to ensure that any future arrangement is transparent and fair. Otherwise, we risk increasing government debt and leaving inefficiencies unresolved,” he warned.
A balanced approach to reform
Mr. Sarpong advocated for a balanced approach that combines elements of privatization with strengthened public sector performance.
The state, he said, does not need to choose between full privatization and keeping ECG as it is, arguing that there are intermediate options, like partial privatization or concessions for specific activities that can bring in private sector efficiency while maintaining public oversight.
He emphasized the need for transparency, accountability, and careful planning.
“Privatization is not a magic bullet. It’s about structure. If we can get the structure right, we can achieve sustainable improvements in our electricity sector,” he stated.
Mr. Sarpong stressed that until Ghana addresses the root causes of inefficiencies in ECG and the broader energy sector, privatization will only be a band-aid solution.