As the public debate of the imposition of the new Energy Sector Amended Levy continues to rage after Parliament’s approval of the bill earlier this week, this newspaper wants to declare its qualified support for the new tax in the light of the financial predicament which the President Mahama administration has inherited and its implications if not resolved.
Surely, paying a GHc1 levy on each litre of petroleum products out of the effective savings of some GHc4 per litre given consumers by the sharp appreciation of the cedi against the dollar over the past two months is an affordable price to pay for the guarantee of sustained 24 hour electricity supply, which would not happen if the debt is not paid off and companies along the power supply chain are unable to remain in operation generating and distributing electricity.
All the potential economic gains we are now looking forward to as a country are dependent on our having to power to drive our economic activities Without stable electrical power, the economy cannot generate the employment that our youth in particular so direly need and the economy as a whole will not be able to increase the productivity that is requisite if Ghana’s economic performance is to improve on a sustainable basis
Without regular electricity Ghana cannot produce cost competitive exports for the international market, which would jeopardize the cedi’s exchange rate against the dollar, which in turn would ultimately eradicate the cedi’s recent appreciation and the consequent cedi denominated savings consumers are enjoying on the price of petroleum products.
However we call on government to keep its promise to ring fence the revenues generated by the new levy and devote all of them to the stated purpose of paying down the energy sector legacy debt. Indeed, one worry that Ghanaians have expressed relates to the failure of past efforts to defray energy sector financial shortfalls. They point out that ESLA was introduced in 2015 with the promise that it would defray the then energy debt in five years after which the levy would be terminated. A decade later however, it is still being levied but the energy sector debt has risen further rather than fallen because the predecessor administration imprudently diverted the levy’s proceeds into other purposes, resulting in the current incongruous situation.
Furthermore, while the new levy will serve to defray the financial gap currently threatening the sustained supply of electricity in Ghana, government should recognize that this is a stop gap measure and a more permanent resolution to the problem of the debt build up needs to be found.
Currently the energy sector is afflicted by several key shortcomings including a costing structure that does not account for the financing of diesel imports for thermal power generation, energy transmission losses of up to a third of power generated, inefficient billing by the Electricity Company of Ghana and recently unveiled sheer financial and material malfeasance within the state owned electricity retailer as well as dubious procurement processes.
These issues must be addressed urgently. If not the new levy will be endless but ineffective just like the one introduced in 2015.
