The second audit of the Electricity Company of Ghana’s (ECG) accounts, conducted by PricewaterhouseCoopers (PwC) and covering Q4 2023, has uncovered significant lapses in financial management and operational inefficiencies.
These findings, combined with previous audit updates, reveal systemic issues undermining the integrity of Ghana’s power sector.
Commenting on the findings, Ben Boakye, Executive Director of the Africa Centre for Energy Policy (ACEP), described the audit as a critical step in exposing the mismanagement undermining Ghana’s power sector. However, he stressed that the findings represent only “the tip of the iceberg.”
“The data reflects just three months of ECG’s operations following a presidential directive to comply with the CWM,” Mr. Boakye noted.
He also highlighted that prior to this directive, ECG’s management under Dubik had outrightly ignored the CWM, further compounding the sector’s financial woes.
Boakye emphasized the potential risks of ECG’s operational practices, particularly its use of multiple bank accounts.
“ECG’s operations across 20 banks could have triggered a full-scale banking crisis without the audit intervention.
“Banks were providing overdrafts to ECG based on the promise of a billion-cedi monthly cash flow.”
Ben Boakye, Executive Director of the Africa Centre for Energy Policy (ACEP)
Another pressing issue highlighted by ACEP is ECG’s handling of foreign currency transactions. The company’s exchange rate losses reportedly grew to approximately 9 billion cedis in 2023, a matter that Boakye said warrants further investigation.
According to ACEP, ECG purchased U.S. dollars at rates significantly above those offered by the Bank of Ghana or commercial banks. At one point, ECG bought dollars at 13.95 cedis to the dollar, even though the average rate among commercial banks was around 11.
Additionally, the company reportedly sourced foreign currency from international money transfer operators rather than established financial institutions.
“How the central bank remains oblivious to this practice is unbelievable,” Boakye remarked. He also criticized ECG’s lack of transparency, noting that a request for exchange rate data under the Right to Information (RTI) Act has gone unanswered for nearly a year.
The audit also raised questions about Hubtel, a private company involved in collecting payments on behalf of ECG.
According to the report, Hubtel deposits funds into a joint account before transferring them to ECG.
“The whole Hubtel issue has not been adequately addressed in the audit. Hubtel collects payments into its account before transferring the funds to ECG.
“The question remains: how much of this money goes into the fund established by both ECG and Hubtel before final payments are made into ECG’s account?”
Ben Boakye, Executive Director of the Africa Centre for Energy Policy (ACEP)
Implications for Ghana’s Power Sector
The PwC audit findings have far-reaching implications for Ghana’s energy sector. The systemic financial mismanagement and lack of transparency at ECG exacerbate the sector’s ongoing challenges, including a debt burden exceeding USD 2.5 billion.
These inefficiencies hinder the ability of power sector stakeholders to invest in infrastructure and meet growing electricity demand.
The Cash Waterfall Mechanism, intended to ensure equitable revenue distribution, has been rendered ineffective by ECG’s underreporting and misallocation of funds.
Despite these staggering revelations, ECG has managed to dominate public discourse by focusing on nominal revenue growth.
However, the underlying issues of financial mismanagement, inefficiency, and lack of transparency continue to undermine the power sector’s stability and progress.
The proliferation of bank accounts, unexplained deductions, and questionable currency practices suggest systemic issues that require urgent attention.
“A comprehensive forensic audit covering 2021 to 2024 is urgently needed,” Boakye urged. Such an audit, he argued, should go beyond bank reconciliations and examine operational expenditures, revenue collection practices, and exchange rate policies.
The PwC audit has exposed significant cracks in ECG’s financial and operational framework, raising serious concerns about its governance and accountability.
The findings point to a need for sweeping reforms to restore trust and stability in Ghana’s power sector.
Moving forward, stakeholders must prioritize transparency, implement robust financial management systems, and hold those responsible for mismanagement accountable.
As ACEP’s Ben Boakye aptly noted, this is not just about numbers; it is about safeguarding the integrity of a sector that is vital to Ghana’s economic future.
Without decisive action, ECG’s mismanagement could continue to jeopardize the country’s energy security and economic growth.
The clock is ticking, and the power sector cannot afford further delays in addressing these systemic challenges.
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