Power Supply the Key to Investment in Ghana

LAST month's business seminar in Johannesburg, hosted by the government of Ghana to coincide with the country's 50th anniversary of independence, provided South African companies with an opportunity to learn first-hand about trade and investment prospects that extend beyond mining and exploration.

The seminar was attended by senior Ghanaian government officials and prominent business leaders such as Sam Jonah.

Mining and exploration has dominated Ghana's foreign direct investment (FDI) inflows in recent years.

While mining companies such as Goldfields, Anglogold Ashanti, Golden Star Resources and Newmont Mining all have substantial operating mines in the country, there is also sufficient exploration being undertaken by junior mining companies to ensure that there is adequate feed-stock for the development of new mines. Ghana's newest mine is the Ahafo mine owned by Newmont, which poured its first gold in August last year.

While Ahafo sold 125000 ounces in the first quarter of this year, gold production and operating costs have been affected by the continuing shortage of power, mainly due to low water levels at Lake Volta, which services the Akosombo hydroelectric facility. This has motivated Newmont and other mining companies to invest in a new 80Mw power plant at Tema, with construction expected to be completed before year-end. Power will be distributed proportionately between the four participating mines and the public.

The shortage of power in Ghana is a problem that the government knows it must address as a matter of urgency -- if not by itself, in cooperation with other countries in the region. The establishment of a west African power pool has long been seen as a regional solution that will allow sharing of resources between countries. To this end, the African Development Bank committed itself in April to provide $24,2m to the government of Ghana and $26,2m to the government of Benin to connect the power grids between Ghana, Togo and Benin.

The project, which will be implemented through the Volta River Authority of Ghana and the Electricity Supply Commission of Benin, will see the construction of 338km of 330kV single-circuit line from Volta (near Tema) in Ghana through Momé Hagou in Togo to Sakete in Benin. It will also include extension of the Volta 330kV substation, installation of a new 330kV substation at Momé Hagou and expansion of the Sakete 330kV substation. The project is to start in November 2007 and will be implemented over 42 months.

For companies seeking to invest in Ghana, particularly in the manufacturing sector, a reliable and affordable supply of electricity is a prerequisite, and with annual growth in electricity consumption estimated at 12%, the government will be hard-pressed to roll out its strategy to increase access to grid electricity for domestic consumers from 54% to 75% by 2015.

This is increasingly important if the government wishes to promote the country as a springboard to penetrate the 15 markets that make up the Economic Community of West African States, which has a collective population greater than 250-million.

While Ghana may not have the appeal of other countries in west Africa such as Nigeria in terms of market size, the government has displayed its resolve to establish a business environment that is relatively free of bureaucracy and corruption, permits smooth entry for new investors and protects private investment. This is backed up by a first-rate road system, a reliable and extensive telecommunications network and efficient port facilities at Tema and Takoradi.

These efforts have been recognised by institutions such as the World Bank, which last year ranked Ghana first in Africa and ninth in the world among economies that have implemented major reforms aimed at improving conditions for doing business.

Link to allAfrica.com: South Africa: Power Supply the Key to Investment in Ghana (Page 1 of 1)