Electricity is one of the most important determining factors of the economic prosperity of any nation. Electricity plays a vital role in delivering quality service serving as the building block on which every sector of a nation’s economy thrives. The above emphasizes how crucial electricity is for human existence and businesses in these modern times.
The mission statement of the Electricity Company of Ghana (ECG) further amplifies the importance of electricity: “To provide quality, reliable, and safe electricity services to support the economic growth and development of Ghana” (ECG, 2014 n.d). The consistent supply of electricity to businesses in Ghana is indeed a contributor to the sustainable growth of the trade industry.
Ghana has made progress over the decade in increasing electricity generation and access. However, beneath these improvements lies the inefficiencies resulting in the high cost of electricity in the country.
High Electricity Rate in Ghana
As countries change their electrical power to ones that use less carbon, there must be a need to build balanced energy systems. Ghana depended on the Akosombo Dam, but there was a shift to thermals when rainfall patterns changed in the 1980s. Whereas the hydro-electrical dam accounted for 68% of electricity generated in 2000, it now accounts for only 36%. Ghana also has a better balance source of fuel for electricity generation.
The World Energy Council ranked Ghana among the top 10 countries that have improved energy security and equity. Despite this improvement, there are a lot of discrepancies in the energy sector, and power remains expensive. Electricity tariffs in Ghana are overpriced compared to some neighbouring West African countries.
In 2021 Ghana’s electricity tariffs averaged 15.5 cents per kilowatt against 10.5 cents per kilowatt in our neighbouring countries. In a recent press address, the Deputy Chief Executive Officer of the Millennium Challenge Corporation, Mahmoud Bah, reiterated the high electricity rate in the country and the need to reduce it.
Statistics show that about 26% of the electricity generated in the country is lost during distribution and this inefficiency by the personnel and lack of machinery also account for the high price of electricity. A business owner in the business district of Accra stated that electricity account for almost 35% of the labour cost of his establishment.
Effect of the High Cost of Electricity
Cost plays a significant role in the measurement of profit. Profit is only realizable where the cost of production is less than revenue. Businesses having access to sufficient and affordable electricity is therefore crucial to their profitability and growth. The World Bank ranked electricity as the second most important constraint to business activities in the country and estimated that Ghana lost about 1.8 per cent of its GDP because of electricity.
In the utility industry, when the cost of production is very high, the public’s interests are at risk through price exploitation because they want to maximize profit.
A business analyst stated that it is the high price of electricity that makes businesses in the country not able to compete with the foreign conglomerates. He added that the high cost of electricity makes most start-ups in the country run out of business.
If not addressed, these issues could derail the development of the nation.
Photo Credit: CGTN Africa