LACK
OF DUE DILIGENCE IN ENERGY DEALS IN GHANA AND ITS
IMPLICATIONS
ON ‘DUMSOR’
RICHARD
OBENG MENSAH*
President Akufo-Addo on 6th August
2018 relieved his Minister of Energy, Mr. Boakye Agyarko, of his position. Although
the Communication Directorate of the Government did not assign any specific
reason to Mr. Agyarko’s immediate sacking, the dismissal is certainly connected
to the controversial renegotiated AMERI deal. Some experts and stakeholders in
the energy industry have hailed the president’s decision and are calling for
further show down in the Ministry of Energy, including possible dismissal of the
three Deputy Ministers of Energy.[1]
The former minister and his team
reviewed and renamed the $510 million 2015 AMERI deal as the Novated and
Amended AMERI deal. The Akufo-Addo government
promised to review the original deal which was entered into by the Mahama administration
in 2015 because it was allegedly over-priced by $150 million. For Emmanuel
Kuyole, Executive Director for the Centre for Extractives and Development Africa
(CEDA), “the restructuring of the arrangement was riddled with errors”.[2]
The botched reviewed AMERI deal which has undoubtedly brought a lot of
embarrassment on the people and Government of Ghana, caused the latter to withdraw
it from Parliament. Nevertheless, the lack of due diligence in relation to the AMERI
saga has wide implications on reliable electricity supply in Ghana.
The AMERI saga once again raises questions
about lack of due diligence on the part of some African leaders in relation to international
energy agreements. The relevant case that comes to mind is the Attorney-General v Faroe Atlantic Co. Ltd[3].
The facts of the Faroe Case are that on 24th July 1998, the plaintiffs-respondents
(Faroe Atlantic Co. Ltd) entered into a Power Purchase Agreement (PPA) with the
Government of Ghana for the purchase of electric power.[4]
The plaintiffs alleged a breach of the agreement and sued the Attorney-General,
representing the Government of Ghana, in the High Court, Accra and claimed specific
performance or in the alternative damages for breach of contract. The
plaintiffs on 8th September 1998 applied for summary judgement and the trial
High Court entered final judgement against the defendant for the reliefs
endorsed on the writ of summons. The defendant did not appeal against the
judgement. The trial High Court on 18th September 2001, subsequent to a motion
filed by the plaintiffs on 8th September 1998 to enforce the summary judgment,
gave judgment to the plaintiffs in the sum of US$6,298,354 as damages plus
interest and an assessed damage of ¢100,000,000.[5]
The trial court also ordered the plaintiffs to refund an advance payment of
US$855,000 paid by the Government of Ghana under the agreement.
The defendant
appealed to the Court of Appeal but the appeal was dismissed. The Court of
Appeal affirmed the trial court’s decision to hear the evidence on damages and
confirmed the award of damages.[6]
The defendant on 23rd September 2003
appealed to the Supreme Court and questioned the legality of the summary
judgement entered against it and the subsequent damages founded on the summary
judgment.[7]
Counsel for the defendant argued that the PPA, although validly concluded, was void for non-compliance with article 181of
the 1992 Constitution. The Court unanimously allowed the appeal and held that
the contract was unconstitutional and void for non-compliance with article 181 which
requires the Government of Ghana to lay before Parliament all international
business loan agreements of which the Government is a party.
Likewise the ranging AMERI saga, the
conduct of the Government of Ghana in the Faroe case has adverse implications
on private investment in Ghana’s power sector and power crisis (‘dumsor’) in
the country. The Government’s lack of due diligence, culminating in its failure
to comply with the requirements of article 181(1)-(2) in the Faroe case,
wrongfully postulates that a private investor in Ghana’s power sector risks
losing his investment if the Government fails to exhaust all processes
necessary to constitutionally validate an agreement under article 181(5). In
addition to the lack of due diligence, the Faroe case took seven years to
decide; from the filing of the writ in the High Court to the determination of
the appeal by the Supreme Court. The case unnecessarily suffered series of
adjournments at the High Court.[8]
The needless delay, coupled with the Government’s lack of due diligence and the
oxymoronic decision of the Supreme Court, do not enhance investor confidence in
Ghana’s power sector.
Ghana has had five major power
crises since 1984[9] despite several reforms in its power sector.[10] Ghana is among the top 10 countries in the world that have
experienced and continue to experience crippling load shedding.[11] One of the root causes of this trend in Ghana is the failure to
invest in the power sector;[12] more particularly investment in electricity infrastructure.[13] Ghana’s inadequate power supply infrastructure is also due to
failure to sustain power sector investment programmes.[14] Sub-Saharan Africa’s energy use has
risen by 45% since 2000 due to rapid economic growth.[15] Many of its governments have thus intensified their efforts to
tackle the numerous regulatory and political barriers that hold back investment
in domestic energy supply.[16] An estimated US$40.8 billion a year in investments is needed for
Africa’s power sector and the private sector is expected to play a significant
role in closing the demand-resources gap by providing funds and expertise.[17] Ghana’s total capital investment is estimated at US$4.3-5.4
billion for the period 2006-2020 with investment in its electricity subsector
taking over 70% of the total amount.[18] However, regulatory impediments and risks, among
other factors, impede private investment in energy infrastructure in most
developing African countries such as Ghana.[19]
Ghana should thus hasten slowly and carefully with the botched AMERI deal to
enhance private-investor confidence in the power sector.
*The writer is a certified life and
leadership coach, a legal academic, and a prolific author of 7 books and over
200 articles. Blog:
www.richard-obeng-mensah.blogspot.com Email:richardobengmensah@gmail.com
[1]
Zaina Adamu, “Ex-Energy Ministers deal was ‘simply wrong’ – experts” https://www.myjoyonline.com/business/2018/August-8th/ex-energy-ministers-deal-was-simply-wrong-experts.php.
Accessed 8 August 2018.
[2]
Ibid
[3] Attorney-General v Faroe
Atlantic Co Ltd [2005] Supreme Court Appeal No J4/22/2004, [2005-2006]
SCGLR 271.
[9] Paul Adjei Kwakwa, ‘Energy-Growth
Nexus and Energy Demand in Ghana: A Review of Empirical Studies’ (2014) 1
Applied Research Journal 28.
[10] Ishmael Edjekumhene, Martin Bawa
Amadu, Abeeku Brew-Hammond, ‘Power Sector Reform in Ghana: The Untold Story’
<http://www.wri.org/sites/default/files/powerpolitics_ghana.pdf> accessed
13 June 2016.
[11] Louis Schoeman, ‘Top 10 Countries
That Have Experienced and Continue to Experienced Crippling Load Shedding’ (Power
Plant, 15 May 2015)
<ww.powerplanet.co.za/blog/top-10-countries-that-have-experienced-and-continue-to-experience-crippling-load-shedding>
accessed 5 March 2016.
[12] Joseph Kapika and Anton Eberhard, Power-Sector
Reform and Regulation in Africa: Lessons from Kenya, Tanzania, Uganda, Zambia,
Namibia and Ghana (HSRC Press 2013).
[13] International Monetary Fund,
‘Regional Economic Outlook: Sub-Saharan Africa’
<https://www.imf.org/external/pubs/ft/reo/2008/AFR/eng/sreo0408.pdf>
accessed 2 June 2016.
[14] Ministry of Energy (Ghana), ‘Energy
Sector Strategy and Development Plan 2010’
<http://ghanaoilwatch.org/images/laws/energy_strategy.pdf> accessed 15
February 2016.
[15] International Energy Agency (IEA),
‘Africa Energy Outlook: A Focus on Energy Prospects in Sub-Saharan Africa’
<https://www.iea.org/publications/freepublications/publication/WEO2014_AfricaEnergyOutlook.pdf>
accessed 15 February 2016.
[16] Ibid.
[17]Dambudzo Muzenda, ‘Increasing
Private Investment in African Energy Infrastructure’
<http://www.oecd.org/investment/investmentfordevelopment/43966848.pdf>
accessed 4 June 2016.
