Cost pressures: Power shortages and the declining currency are having a notable impact on the sector

Access to electricity supplies remains the biggest concern for industries in Ghana, according to those involved in the sector. “The major concern is energy supply. The impact of power outages is huge for businesses, and the inconsistencies in the load management schedule makes planning very difficult,” John Defor, a policy research officer at the Association of Ghana Industries (AGI), told OBG. “Companies have staff who report for work and there is no power, but their wages must still be paid anyway. Some industries lose raw material, since the power goes off halfway through production.”

Energy Challenges

In October 2014 the minister of energy, Emmanuel Armah-Kofi Buah, said that the government plans to add 770 MW of supply to the national grid by the end of 2015. Overall, the government hopes to reach an installed capacity of 5000 MW by 2017, up from 2300 MW in February 2015, through new plants powered by domestic gas resources, as well as temporary fixes, such as leased floating power plants (see Utilities chapter). The problem is in large part a result of external factors, including a drop in gas imports from Nigeria and a drought that has limited hydroelectric production.

As well as affecting existing businesses, the shortages impact investment. Tony Groosman, Dow Chemicals’ West African managing director, told OBG, “Access to gas is a key determinant in selecting a chemical production site. West Africa is still some time away from developing the resources required for this type of capital investments in the region.”

In November 2014 President John Dramani Mahama created a Ministry of Power to further address the situation, while in his State of the Nation address in February 2015 he told Ghanaians there needed to be more than a quick fix. “We have been here before; in 1983, in 1998, in 2006 and 2007 we suffered a similar occurrence. I do not intend to manage the situation as has been done in the past. I intend to fix it,” he said.

However, in the short term the power shortage is having a notable impact on Ghana’s industries. In the fourth quarter of 2014 heavy industries were included in the government’s enforced electricity schedule, put in place to try to ration usage across the country. The schedule requires 48 hours of power from the grid, followed by 24 hours of outage. This has left many businesses relying heavily on diesel generators, which increases power costs by an average of six times that of using electricity supplied by the grid, according to AGI estimates.

Emad Adeeb, managing director of caterpillar dealers Mantrac Ghana, told OBG, “Demand for generators now cuts across several segments, from residential up to small and medium-sized enterprises to larger organisations. It is not surprising given the power issues: generators help businesses fill the gap left by the grid, thereby improving production.”

“The withdrawal of the concession allowing certain industrial zones to have regular supply of electricity as much as possible was a really big blow to heavy industries,” said Defor. “Generators are supposed to be an emergency measure but their usage is being stretched and some keep breaking down.”

Currency Concerns

Electricity is not the only stumbling block manufacturers are currently grappling with. In 2014 the cedi declined in value by 25% against the dollar, and by early September 2015 it had tumbled 20% since the start of the year. While this has been beneficial to exports, it has strongly affected industries and businesses that rely on imported materials, affecting consumers.

Earlier efforts by the government to stem the currency slide had little effect, but there is hope that the $940m IMF support package agreed in February 2015 will help stabilise the situation, with the first tranche of money, $114.8m, to be used to shore up the central bank’s gross international reserves to support the cedi, according to Seth Terkper, the finance minister.