Electricity is essential to the development of any state. In today’s digital-industrial age, the key to economic and social progress lies in the capacity of states to use technological advances, and the energy resources that fuel them, to their fullest potential. For one West African nation, electricity, which the rest of us usually take for granted, has never been more critical.
For several years, Ghana has been the second-largest economy in West Africa and has been considered one of Africa’s biggest democratic success stories. Between 1991 and 2006, Ghana experienced an estimated 23% drop in its poverty rate. As a major producer of the world’s supply of gold and cocoa, and with its recently discovered oil reserves, the Ghanaian economy grew by an unprecedented 15% in 2011. Employment was up, the middle class was thriving, and development was palpable.
Since 2013, however, Ghana’s economic growth has slowed dramatically. Drops in key commodity prices, crippling inflation, and a slump in the manufacturing sector, have created a multitude of macro- and- micro-economic complications. Having lost over 30% of its value in 2014, the Cedi, Ghana’s currency, is currently one of the worst performing currencies in the world. Ghana has recently received a $918 million extended credit facility from the International Monetary Fund intended to stabilize the economy and ease the country’s international debt. These newly acquired funds have the potential to help the economy bounce back, but only if something is done about Ghana’s failing energy infrastructure.
Critically low levels in the Akosombo Dam, the country’s main source of hydroelectric energy, have caused power outages lasting up to 12 hours a day that have come to be known as “Dumsor”, literally meaning “off on” in the Akan language.With minimal electricity, all of Ghana’s most profitable sectors have screeched to a devastating halt. This has contributed to Ghana’s inability to gain access as an equal player on the global economic stage, and in turn has damaged its investment appeal.
Although Ghana is rich in natural resources, including gold, oil, and cocoa, investors will be unwilling to pursue any potential ventures if the infrastructure required to generate revenue from these resources cannot function. With frequent electricity outages interrupting production, running any sized business has become expensive. Several foreign-owned companies have experienced production slumps, and have had no choice but to begin scaling back operations. If Ghana fails to revamp its energy infrastructure, it will be only a matter of time before it loses its competitive edge and investors choose to take their business elsewhere.
The Ghanaian government’s lack of transparency has also contributed to the lack of foreign direct investment in the country. Ghana has experienced frequent bouts of power outages for decades, and the government has shown a lack of will to fulfill its promises to modernize Ghana’s infrastructure. Earlier this year, Ghana’s Auditor General revealed that the government had spent funds which were intended to improve the power crisis on 38 luxury cars for government officials. This lack of transparency has not gone unnoticed by Ghana’s partners in the international community either. Providers of foreign aid have been left with a bad taste in their mouths, and much of Ghana’s most recent aid packages have been conditional on an increase in transparency of Accra’s economic outflows and budgeting processes.
As a country that has maintained a reputation as one of Africa’s economic success stories, Ghana’s electricity troubles represent familiar, but pressing, challenges of development and macroeconomic competition. In the future, Ghana will have to prioritize transparency, explore alternative sources of energy, and make good on its promises of dependable energy delivery to the entire country. With a little innovation and integrity, it is possible to restore the lights on Ghana’s bright economic future.
