Customers peruse goods at Makola market in Accra...Customers peruse goods at Makola market in Accra, Ghana, June 15, 2015. Picture taken June 15. REUTERS/Francis Kokoroko
Economists say Ghana's informal economy is bearing the brunt of power cuts © Reuters

A promotion flashing on the screens of Barclays cash machines around Ghana’s capital Accra indicates the spending priorities of the city’s residents these days. The bank is advertising “power loans for a generator, inverter, or solar device of your choice”.

Rising demand for generators is seen as one sign of an economic meltdown caused partly by poor management of oil revenues in a west African nation that was until recently one of the continent’s biggest success stories.

Four years after the onset of oil production, Ghana is grappling with a fiscal crisis that forced the government to seek a $1 billion International Monetary Fund programme earlier this year.

The government argues that electricity shortages indicate the country has become a victim of its own success: “Which developed country records a 12 per cent growth (annually) in demand for power? None,” said power minister Kwabena Donkor.

Demand for power rose when oil began flowing in 2011 and economic growth surged to above 14 per cent, as an emerging middle class and a nouveau riche needed more energy to power their lifestyles.

“The increasing Ghanaian middle class has a thirst for power. We regret that supply has not caught up with demand that also arises out of our exponential growth,” Mr Donkor said. Growth is now forecast at 3.9 per cent in 2015, reflecting higher public spending and last year’s drop in commodity prices. Yet demand for power remains high and could hinder growth.

The fact that supply has not kept pace with demand, experts and everyday citizens say, is proof of the government’s failure to use its newfound oil revenues — forecast to hit $1.6bn next year — to boost investments in power infrastructure. The irony of the 12- and 24-hour power cuts hitting Accra is that Ghana has the gas reserves to ease them. If decisions had been made more quickly and wisely, the country could have been using its own gas for power generation, experts say.

The cuts, known locally as “light offs”, compound the woes of Ghanaians struggling with a local currency that has lost nearly a quarter of its value in 2015 alone. Spoilt food, wrinkled clothes and trouble sleeping in the heat are common complaints, but widening lay-offs by manufacturing companies hint at the severity of the economic impact.

The IMF calls the electricity crisis “the single-most important risk” to the programme aiming to help Ghana put its economy back on the path to strong growth. “If the government cannot implement its strategy to address this issue as planned by the end of this year, it will continue to weigh on economic activity next year,” says Samir Jahjah, the IMF’s representative in Ghana.

Ghana GDP

But many worry that the history of neglect of the power sector by successive governments does not bode well for the prospects of a quick—or sustainable—fix.

The government says the rolling blackouts it calls “load shedding” will be over by year’s end. It is implementing emergency solutions including the use of Turkish power barges, now postponed until September.

Ghana has long suffered cyclical power shortages linked partly to varying water levels at the Akosombo hydroelectric dam that contributes about half the country’s supply. But it is now having a particularly severe impact “because of the increasing reliance of a modern, urbanising economy on electricity”, says Sunil Mathrani, senior energy specialist for Africa at the World Bank.

Standing in the shadows at an electronics shop in central Accra, Theophilus, an employee, said: “Light is everything. You need it to iron, you need it to go to work and at work. You need it at the barber’s shop and to preserve food. When you don’t have light, life becomes very difficult. You lose a lot.”

About 70 per cent of Ghanaians have access to the electricity grid, Mr Mathrani notes. He reckons Ghana’s large informal economy is bearing the brunt. “These folks can’t afford to run generators, so they simply have to shut down.”

Meanwhile, Ghanaians who had been using their disposable income on new cars, plane tickets and property are now spending to keep their lights on. “We are making investments in something we hadn’t planned for,” said fund manager Alex Aseidu. “People shouldn’t be investing in generators when there should be available power provided by the government.”

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