Diagnosing the "Dumsor" (Power/Energy) Crisis in Ghana: Who is to Blame - Urban Planning or Engineering? (PART I)

Power outages are not alien to the African continent. In a visit to Lagos in Nigeria, Africa’s most populous country I couldn’t hold back my shock in view of the frequent power outages. Arguably, Africa’s most advanced economy, South Africa is also having its own share of power rationing in recent times. Whiles there are many other African countries in similar quagmire of darkness and managerial inefficiencies, I would like to focus my intellectual energy on the energy/power problem in Ghana, which has gain notoriety as “DUMSOR”. In the abundance of definitions, dumsor has assumed similar and varying meanings. This in my opinion will depend on a person’s location in Ghana and one way to simplify and understand the locational dimension to dumsor is to adopt the Planners’ classification. Planners classify society mainly into two: rural and urban. For communities that have never had electricity (very typical rural areas), dumsor is in no dimension a problem. No one can take away what you do not have. Those in the mainland rural areas may have some consents because their lights are also taken occasionally, and I mean occasionally, at least according to media reportage of power rationing schedules and hearsay evidence. 

Despite my deficiency of knowledge in urban planning, I contend in this article that dumsor is more of an urban problem and for that matter a revelation of the weakness in urban planning systems in Ghana, not merely and engineering phenomenon. It is in fact also a sociological and management problem. However, if I assume that Planners are urban managers, then I dare say that dumsor is first and foremost an urban planning problem and engineering a derivative ― depends on the former. Thus, attempts to blame the engineers solely without throwing the mud at the planners and society may be a wrong attribution and an exercise in futility. In my candid opinion, whiles the energy/power generation function is mainly dependent on the engineers, the management function is multi-dimensional depending on themselves, the planners and the wider society. Thus, irrespective of generation capacity, if urban planning is not taking serious, we may never see the light of sustainable power supply. In this article, I will focus on the role of stakeholders in sustainable infrastructure development. I will start with some definitions and concepts, and facts about current energy/power supply projects in Africa and in Ghana in particular; and examine the role of some of the most important stakeholders.

By definition, the concept of Dumsor is basically an economic disequilibrium problem which result from power shortages – demand of power exceeds supply ― such that power is rationed between households and firms to maximize its use within the constrained framework of economic growth and development. Of the installed capacity of about 2,800 megawatts, we are running just about 1,200 megawatts (MW). According to African Centre for Energy Policy (ACEP), the four major power crises in Ghana occurred during the periods 1982/83, 1997/98, 2002/3, 2006/7 and the fifth one in currency. Our history has shown that from 1985 when the Ghana Generation Planning Study was completed, our country should have increased generation capacity by about 3000MW by the end of 2012; if we were adding about 300 MW of power every three years (ibid.). There are two main components of dumsor: planned power rationing and intermittent outages. It appears to me that the former is not so much a problem as the latter because it disorganises planning and productivity. Although we are made to believe that dumsor is being managed with planned schedules, intermittent outages seem to have made the whole idea useless and ineffective. Intermittent outages are uncontrolled and occur randomly. There are two sides to this: (1) uncertainties and (1) risk. Uncertainty is different from risk (calculated) basically because it cannot be predicted scientifically unless through so magic or prophesy mainly because of the lack of data on its occurrence.

With historical data, we are able to predict trends and any deviation from the expectation is called risk. Risk has direction (either positive or negative) and its magnitude simply measured as the difference between actual value and the expected value (usually the mean). Much of science is based on the availability of data, which facilitates the management of this expected deviation called risk. Consider this example, if you are blind-folded, taken to a dark room for the first time and asked to pick a cup, you are unlikely to locate the cup because you simply don’t know the relative position of the cup. However, if you have been to the same room a number of times and therefore know the relative position of the cup, your chances of picking it even if blind-folded is enhanced. And for many of us, this is what helps us to locate the lamb and candles when we experience dumsor. This is called risk whiles the first example is uncertainty; they are however interchanged loosely even by experts sometimes. In relation to energy/power supply, uncertainty is typified by arts of God including droughts, thunders and lightning. Elements of risk on the other hand include faulty infrastructure and machines, faulty wiring and shocks to supply due to too much pressure on the energy/power stock (what is available) beside others. Solving this particular problem will require huge investment in replacing old-inefficient infrastructure, which government tax revenue is too little to deal with. A reason to investigate proposals for private generation.

Whiles uncertainties are mostly out of the control of man, dumsor, resulting from those elements of risk listed above are due to mismanagement by man. This is where I believe the debate lies and the question of who is to manage begs asking? To some NDC commentators like Sam George, the incompetence of engineers working with the utilities providers including the Volta River Authority, Electricity Company of Ghana and Gridco are to blame. This view seems popular but very limited. I think that other stakeholders, particularly the Urban Planners and consumers including you and me must take the greater blame. We will come back to examine this question in detail after we have looked at investments in energy and power in Ghana.

Africa’s Infrastructure Deficit: Electricity Coverage and Generation Capacity

A critical look at Table 1 below reveal that Africa is substantially behind in the development race not only in relation to the advanced economies but also relative to other low income countries (LICS) outside Africa in terms of electricity coverage and generation capacity. For instance in terms of pave-road density, Africa’s low income countries (LICs) and middle income countries (MICs) fall short by approximately as much as four and two times respectively, compared with other LICs and MICs around the world. However, a striking feature is the total road density benchmark. Africa’s road density is higher and this could be attributed to two main factors – size and approach to development. Africa is relatively bigger – second largest continent - and the horizontal approach to development adopted by most Africa countries requires the construction of more roads to connect human settlements. This is however not an advantage, rather maybe a problem because most of these roads are unpaved and of poor quality. In fact, the horizontal development approach is associated with low population densities and appears inefficiency, expensive and could contribute to the increasing infrastructure deficit. Technically, this embodies the characteristics of what the Planners refer to as suburbanization and exurbanisation. Suburbanization is the increased movement of people/services and industries from the centres of inner urban areas outwards and onto the edges of the built-up area. Exurbanization is the growth of low-density, semi-rural settlements beyond the built-up urban periphery of cities. The most part the people who live in the settlements remain functionally linked to the city.

Table 1: International and Interregional Infrastructure Deficits

Normalized Units	Africa LICs	Other LICs	Africa MICs	Other MICs
Generation capacity	39	326	293	648
Electricity coverage	14	41	37	88
Paved-road density	34	134	284	461
Total road density	150	29	381	106
Normalized Units	ECOWAS	EAC	SADC	CENTRAL
Generation capacity	31	16	176	47
Electricity coverage	18	6	24	21
Paved-road density	38	29	92	4
Total road density	144	362	193	44

Source: Yepes, Pierce and Foster (2008)

Note: Road density is measured in kilometers per 100 square kilometers of arable land; generation capacity in megawatts per million population; and electricity coverage in percentage of population.

LICs: Low Income Countries  

MICs: Middle Income Countries

EAC = East African Community; ECOWAS = Economic Community of West African States; SADC = Southern African Development Community.

Still on table 1, Within the African region, the SADC has proved to be a force and leader in infrastructure development, followed by ECOWAS, EAC and then Central Africa. South Africa, Namibia, Botswana and Lesotho remain the major powerhouses in the SADC region. Most of the countries in the SADC are middle-income countries which may explain their commensurate relatively high investment in infrastructure in the Africa region. Nigeria, Ghana, Liberia and Sierra Leone typify infrastructure investment in the ECOWAS region; while Kenya and Ethiopia account for most infrastructure investment in the EAC. The lag in infrastructure investment in the Central Africa could be attributed to its classification as a fragile region troubled by civil wars coupled with low-income levels.

Developing economies have substantial infrastructure gaps with a perennial estimate at US$31 billion per year^[1]. Underlying the deficit is the fluctuation of investment which dipped by US$50 billion in 2003 after a peak at US$131 billion in 1997, before rising again to $158 billion in 2007^[2]. A number of studies attribute the anomaly to project delays^[3]. The lags in project delivery could lead to significant construction cost escalations, prolonged duration and poor quality of workmanship. Notwithstanding, a report by Deloitte (2013) shows some of the major infrastructure investments in Africa. About 322 ground breaking construction projects each valued at not less than US$50 million each, totalling about US$222,767 million are underway. Energy/Power projects are the major focus of recent investments constituting about 36% of all projects. Ghana and Nigeria are the main infrastructure development hotspots in West Africa. Among Ghana’s energy projects include the Ghana National Gas Project (USD 850 million) and Sunon Asogli Power Plant. Other generation expansion programmes started in 2007 following the power crisis of 2006/2007 with the Bui Hydroelectricity Project, the Tema Thermal Plant 1 and 2, the Mine Reserve Plant, kpone Thermal Plant and the reactivation of the Osagyefo Barge. These projects were expected to add 1100MW of generation capacity to the grid. So far only 375MW has been added. Other emergency projects are expected to generate additional 1,000MW in the short term according to Dr. Kwabena Donkor (Minister of Power). The Volta River Authority, Ghana's main power generator had projected about US$1.5 billion is needed to improve the country's power generation, while President John Dramani Mahama indicated the country required to generate at least 220 megawatts every year to end the crisis.

Conclusion

It is obvious from this brief discussion on infrastructure deficits in Africa and in Ghana that there has been efforts to increase generation capacity since 2007 but insufficient compared with demand. Both supply and demand can be measured in real and nominal terms, but for the purpose of this article, we shall equate real supply to nominal supply and just refer to it as supply. It is important in economic analysis to hold supply constant to make it easier to examine the demand-side effects. The demand problem is best understood by distinguishing between ‘nominal demand’ and ‘real demand’. Given this difference, I contend that the urban planning system contributes immensely to the managerial inefficiencies of our energy/power stock. All other things equal, it could be our lack of understanding about the nature of demand that continues to create the impression that we need more energy. In other words, inefficient management of real demand increases nominal demand and for that matter the need to increase generation capacity to catch up. The equilibrium level of power should be when supply equates real demand, not nominal demand. Thus, the excess over real demand should be understood as a product of inefficiencies in managing demand. In part two of this article, I will focus on the demand-side problem to explain my reason for incriminating the urban planning system in Ghana as to blame for the energy and power crisis, if we are to find the culprits.

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[1] Foster and Briceño-Garmendia (2009)

[2] Platz, 2009; UNECF (2008); Beck et. al. (2007); Martell and Guess (2006); Kehew et. al. (2005)

[3] Fugar and Agyarkwa-Baah (2010); Abd El-Razek, et al. (2008); Sambasivan and Soon (2007)

Growth in Africa: It Can Be Done

BY JEFFREY SACHS

ECONOMIST JEFFREY SACHS HAS BEEN A prominent adviser to governments seeking to reform their economies and raise economic growth. He has also been a critic of the World Bank and the International Monetary Fund (IMF), the international policy organizations that dispense advice and money to struggling countries. Here Sachs discusses how the countries of Africa can escape their continuing poverty.

In the old story, the peasant goes to the priest for advice on saving his dying chickens. The priest recommends prayer, but the chickens continue to die. The priest then recommends music for the chicken coop, but the deaths continue unabated. Pondering again, the priest recommends repainting the chicken coop in bright colors. Finally, all the chickens die. “What a shame,” the priest tells the peasant. “I had so many more good ideas.” Since independence, African countries have looked to donor nations— often their former colonial rulers—and to the international finance institutions for guidance on growth. Indeed, since the onset of the African debt crises of the 1980s, the guidance has become a kind of economic receivership, with the policies of many African nations decided in a seemingly endless cycle of meetings with the IMF, the World Bank, donors, and creditors.

What a shame. So many good ideas, so few results. Output per head fell 0.7 percent between 1978 and 1987, and 0.6 percent during 1987–1994. Some growth is estimated for 1995 but only at 0.6 percent—far below the fastergrowing developing countries. The IMF and World Bank would be absolved of shared responsibility for slow growth if Africa were structurally incapable of growth rates seen in other parts of the world or if the continent’s low growth were an impenetrable mystery. But Africa’s growth rates are not huge mysteries. The evidence on cross-country growth suggests that Africa’s chronically low growth can be explained by standard economic variables linked to identifiable (and remediable) policies. Studies of cross-country growth show that per capita growth is related to:

• the initial income level of the country, with poorer countries tending to grow faster than richer countries; the extent of overall market orientation, including openness to trade, domestic market liberalization, private rather than state ownership, protection of private property rights, and low marginal tax rates;
• the national saving rate, which in turn is strongly affected by the government’s own saving rate; and
•   the geographic and resource structure of the economy.

These four factors can account broadly for Africa’s long-term growth predicament. While it should have grown faster than other developing areas because of relatively low income per head (and hence larger opportunity for “catch-up” growth), Africa grew more slowly. This was mainly because of much higher trade barriers; excessive tax rates; lower saving rates; and adverse structural conditions, including an unusually high incidence of inaccessibility to the sea (15 of 53 countries are landlocked). If the policies are largely to blame, why, then, were they adopted? The historical origins of Africa’s anti market orientation are not hard to discern. After almost a century of colonial depredations, African nations understandably if erroneously viewed open trade and foreign capital as a threat to national sovereignty. As in Sukarno’s Indonesia, Nehru’s India, and Peron’s Argentina, “self sufficiency” and “state leadership,” including state ownership of much of industry, became the guideposts of the economy. As a result, most of Africa went into a largely self-imposed economic exile.

Adam Smith in 1755 famously remarked that “little else is requisite to carry a state to the highest degrees of opulence from the lowest barbarism, but peace, easy taxes, and tolerable administration of justice.” A growth agenda need not be long and complex. Take his points in turn. Peace, of course, is not so easily guaranteed, but the conditions for peace on the continent are better than today’s ghastly headlines would suggest. Several of the large-scale conflicts that have ravaged the continent are over or nearly so. The ongoing disasters, such as in Liberia, Rwanda and Somalia, would be better contained if the West were willing to provide modest support to African based peacekeeping efforts.

“Easy taxes” are well within the ambit of the IMF and World Bank. But here, the IMF stands guilty of neglect, if not malfeasance. African nations need simple, low taxes, with modest revenue targets as a share of GDP. Easy taxes are most essential in international trade, since successful growth will depend, more than anything else, on economic integration with the rest of the world. Africa’s largely self-imposed exile from world markets can end quickly by cutting import tariffs and ending export taxes on agricultural exports. Corporate tax rates should be cut from rates of 40 percent and higher now prevalent in Africa, to rates between 20 percent and 30 percent, as in the outward-oriented East Asian economies. Adam Smith spoke of a “tolerable” administration of justice, not perfect justice. Market liberalization is the primary key to strengthening the rule of law. Free trade, currency convertibility and automatic incorporation of business vastly reduce the scope for official corruption and allow the government to focus on the real public goods—internal public order, the judicial system, basic public health and education, and monetary stability.

All of this is possible only if the government itself has held its own spending to the necessary minimum. The Asian economies show how to function with government spending of 20 percent of GDP or less (China gets by with just 13 percent). Education can usefully absorb around 5 percent of GDP; health, another 3 percent; public administration, 2 percent; the army and police, 3 percent. Government investment spending can be held to 5 percent of GDP but only if the private sector is invited to provide infrastructure in telecommunications, port facilities, and power. This fiscal agenda excludes many popular areas for government spending. There is little room for transfers or social spending beyond education and health (though on my proposals, these would get a hefty 8 percent of GDP). Subsidies to publicly owned companies or marketing boards should be scrapped. Food and housing subsidies for urban workers cannot be financed. And, notably, interest payments on foreign debt are not budgeted for. This is because most bankrupt African states need a fresh start based on deep debt-reduction, which should be implemented in conjunction with far-reaching domestic reforms.

Source: Economist, June 29, 1996, pp. 19–21.