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Industry Reeling Under Power Crisis   
 
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12-Feb-2015  
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The recent power crisis is pushing businesses in the country to the brink of collapse.

While some are taking austere measures to survive, others who cannot bear the adverse effect of the situation have folded up. RAJU RAGHU PARWANI examines the extent of losses incurred by sections of industry as a result.

GHANA has had to halve its economic growth forecast for this year partly due to the chronic power crises that is hurting investor confidence in the economy. The current power crisis being experienced in the country is the greatest disincentive to businesses and investments nationwide.

The country is presently shedding load in the range of 300 to 600 megawatts (MW) on a daily basis as a result of a deficit in power generation. New projects in the power sector meant to expand the country’s generation capacity have failed to meet expectations. The Bui Hydro Plant, Sunon-Asogli and Aboadze Thermal Plants are typical examples.

The state-owned power distributor, Electricity Company of Ghana (ECG) recently announced that, companies will have power for 48 hours, after which they will be without power for a period of 24 hours while domestic consumers will have 12 hours of power followed by a 24-hour power outage.

Mining companies have been the hardest hit in this present crisis. The power distributor recently asked mining companies to cut down their intake by a further five per cent – bringing the reduction to a total 30 per cent. This development will worsen an already wobbly situation within the sector, as companies grapple with record low gold prices amidst higher production costs.

A slump in gold prices last year led to a shedding of about 8,000 workers in the mining sector. But the woes of the sector have been made worse by the erratic power supply.

The telecoms industry has recently also lamented over its rising cost of operations due to the prolonged load-shedding exercise. The situation has worsened with the implementation of the 17.5 per cent tax on petroleum products in November last year.

Industry has since been calling on government to find a lasting solution to the predicament that has bedevilled the country for over two decades.

Frozen Foods going bad

Those in the frozen foods market also have their fair share of the cake. Even though bigger frozen food importers like Beyeeman and Francopat Freezing Companies have cold rooms which are able to keep foods frozen for days in the absence of electricity, they have complained that the power crisis affects the quality of their products.

According to Adjei Manu, General Manager of Beyeeman Freezing Company Limited, the consistent power outages affects the taste of their products because of continuous frosting and de-frosting.

He added that what saves the situation a little is the freezers they have in place that are able to preserve frozen foods for some days.

Effect on SMEs

Small- and Medium-scale Enterprises (SMEs) are considered the main drivers of every economy. However, it is also true that they are the most vulnerable of business entities and the recent power crisis in the country has impacted their businesses negatively.

Mechanics, hairdressers, small scale manufacturers and traders all depend on reliable supply of power to run their businesses profitably without which they will be out of business.

Peter Appiah, a barber, says he spends about GH¢30 on petrol daily when the power goes off from 6am to 6pm. “This is not good for me because I charge only GH¢3 for a haircut... I get about 8 customers a day and that makes it GH¢24. I lose because of that,” Appiah explains.

For Ms Abigail Kumi, a seamstress, running her business cost-effectively and keeping her customers has been her major challenge. She is forced to spend more on fuel for her generator in order to meet customer timelines.

“Now I don’t only have to stay awake into the night to meet my customers’ targets but spend about GH¢50 for fuel so I can work. This is really bad and if it continues like this I’ll be out of business,” Ms Kumi laments.

Pharmaceuticals need respite

Chief Executive Officer (CEO) of Danadams Pharmaceuticals, Dr Yaw Adu-Gyamfi, says his company makes huge loses each month because of unreliable electricity supply.

“Every day that the power goes off, we spend GH¢1,500 on our generator set to be able to produce. I’ll rather pay GH¢50,000 a month for my electricity bill than pay GH¢1,500 for my fuel per day, because the GH¢1,500 does not include the generator maintenance and other cost,” he lamented in a recent interview.

He however charged government to endeavour to fix the power problem in the country.

Printing houses and Newspapers 

Most printing houses at ‘Accra’s printing hub’, Accra Newtown, said they incur an extra cost of production by way of fuelling their generator sets to power their printing machines.

“Aside the extra cost we make from the use of our plant, printing materials like ink, plates and paper have also gone up drastically,” the printers at Newtown complained.

The situation has also threatened the survival of newspaper companies with some of them on the verge of folding up.

 AGI speaks

The Association of Ghana Industries (AGI) recently called on government to put in place a short-term, time-based action plan to address the current energy crisis in the country. According to the President of the Association, James Asare-Adjei, consistent power outages experienced by businesses in the country has taken a major toll on the business environment, especially the manufacturing sector.

Due to the energy situation, the manufacturing sector of the economy grew by an unprecedented negative eight per cent, according to the Association.

“The manufacturing sector continues to shrink and Ghana risks losing its industrial base if government policies do not quickly address these challenges to revive the industrial sector,” he said.

The AGI has always maintained that heavy industries need power to heat their machines long enough to be able to melt ore and precious minerals.

“If the situation continues we will have a crisis on our hands,” said Executive Director of the Association, Mr Seth Twum-Akwaboah. He said job cuts will lead to decreased volume of output.

Ultimately, low profit margins will also affect government revenue accruing from the sector.

Traders pushed to the edge

Fed up with the teething challenges affecting traders in the country, the Ghana Union of Traders Association (GUTA) has asked government to as a matter of urgency reduce fuel prices since “it is an alternative source of power for its members.”

According to GUTA, the constant power cuts in the country is putting undue pressure on businesses and organizations. 

It maintains that most businesses and organizations within its ambit are using generators to power their factories and equipment due to the current load-shedding exercise.

President of the Association, Mr George Ofori says reducing fuel prices will save local businesses from collapsing. 

He notes: “We thought we were lucky when the crude prices in the world market fell to $50 and even to $45 per barrel… Prior to that it was $113 to a barrel and so if it fell to that level, we thought that the price of fuel should have been brought down to about GH¢5 to GH¢6.”

GGEA not happy

“It is unfortunate but it appears the energy situation isn’t getting any better and businesses are just not happy at all,” said President of the Ghanaian German Economic Association (GGEA), Mr Stephen Antwi.

According to the Association, the outlook for this year, in the short term is not good because expenditures had gone up as far as accessing alternative energy sources were concerned.

In most cases, the expenditures that cover fueling and maintenance of generator sets and plants were unbudgeted for, “making it even much more dreadful coming from a very difficult 2014.”

The Association disclosed that the worsening power situation was compelling member companies to cut down costs as much as possible to remain competitive.

“What they do is to lay off people for a while or reduce working hours so as to cut down costs of labour in tandem with the high costs of securing alternative power,”

Government interventions

Short-term (emergency) solutions

Government has however, put in place various short-term measures to shore up the shortfall of power supply.

The Minister of Power, Dr Kwabena Donkor recently announced that Ghana was expecting two power badges from Turkey by the end of the third quarter this year. The investment which is powered by Turkish power-ship maker Karadeniz Holding is to provide two electricity-generating vessels to Ghana in a 10 year supply deal.

According to the Minister, Ghana will come to a financial closure to finalise the deal with its Turkish counterparts by the close of this week.

“We have almost come to a financial closure in terms of the power badges and therefore we are almost there in terms of getting the badges into Ghana,” Dr Donkor said.

The two badges, which are expected to help redeem the country’s power generational shortfall, are valued at US$100 million and will give Ghana an additional 500MW of power.

He said government was also working on bringing another 250MW emergency generating asset to the Aboadze Corridor that will use both the evacuation facilities and gas originally meant for T3.

Dr Donkor noted that government was again working with General Electric (GE) to bring a 250MW emergency unit to be fuelled by LPG to the Tema Corridor. “This is different from GE’s Ghana 1000 project,” he clarified.

“We are also working with another group from Turkey, they are bringing in 200MW to the Tema Corridor and that plant will also use heavy fuel oil,” he added.

Medium- to Long-term solutions

Aside the emergency generating units, the Minister of Power said government was also working on permanent solutions to resolve the country’s crippling power situation.

“In the medium-term for example, Sonon-Asogli Phase 2, the first unit which will give us 180MW should be available by December this year. The second unit that will also give us 180MW should also be available by the end of 2016,” Dr Donkor affirmed.

He said the Kpone Thermal Plant should also be available “subject to fuel-availability at the end of April or sometime May this year.”

Dr Donkor disclosed that Ghana was also looking at going into coal energy generation in the long-term.
 
 
Source: The Finder
 
 

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