Ghana: Could Power Cuts “Put-Off” Mahama Next Year?

Julian Fisher writes from Accra:

One of Accra’s main landmarks is a lighthouse: ironic since the city is now often in darkness.  Its residents have become so accustomed to power cuts over the past year that a new composite word has entered the local lexicon. Dumsor is a rendering of two Twi words meaning put on and put off.  As the weather is to conversations in England, dumsor is to conversations in Accra.  It is hard to escape it.  Even state television carries broadcasts dubbed “Safety Measures During Dumsor”: unplug electrical items when a power-cut strikes and don’t leave candles or kerosene lamps unattended, is the gist.  So all-encompassing is the problem that it is hard to believe that it won’t be a determining factor in next year’s presidential election.

Aside from the personal nuisances of ruined fridge and freezer contents, appliances blown up by power-surges, and half-cooked meals, dumsor is having a significant impact on the economy.  An official in one of Ghana’s leading think-tanks told me that, three years ago, the usual ratio was 24 hours of light to 12 hours of darkness.  Now, that has been reversed.  Assuming that periods of energy provision coincide with working hours, this approximates to a three-day week for those businesses that are unable to afford generators.  And this is not the only economic problem that Ghana faces currently.  Others include:

• Falling oil prices: yes, the country remains a net importer of refined petroleum products, so should benefit from falling prices, but the national budget has certainly taken a hit from the drop in revenue from crude sales;
• Poor fiscal control: with the public sector wage bill ballooning, subsidies draining the national coffers and interest payments rising as the country’s credit rating falls, most of the budget is recurrent expenditure. Last year, capital expenditure was equivalent to only some 5% of GDP, compared to 25% for recurrent expenditure;
• Currency depreciation: as a net importer, Ghana can ill afford the recent sharp fall in the cedi’s value – a depreciation that has offset much of the potential advantage from cheaper refined oil products.

In the circumstances, Ghana had little option but to approach the IMF for help.  It has been a long time in the coming, but a package of financial assistance has finally been agreed.  I am told that the funds to be made available direct from the IMF will be limited in the first of a three year programme, but the government hopes the agreement will bolster confidence in the country, encourage donors to resume programme-funding and halt the slide in the currency.  The political problem posed by all this is that the IMF is imposing a series of austerity conditions, including a freeze on public sector employment, a reduction in subsidies and heightened efficiencies in tax collection.  As a leading trades unionist told me this week, “the IMF” and “the World Bank” are “scary words” for Ghana’s workers, given the effects of previous IMF programmes, which led to wholesale lay-offs.  This interlocutor would not rule out civil unrest in response to similar developments in the coming year.

But the government has over eighteen months to deal with this fall-out.  Punchy rhetoric about the need for IMF support and commitment to austerity this far away from elections is one thing.  It may be a very different matter in twelve months, by which time the government calculates that the IMF programme will have restored stability to the economy and it will no longer need the IFIs.

Maybe so, but it is by no means clear that a sufficiently strong economic turnaround will arrive in time to get the lights back on for elections.  And no matter what the national statistics say, households are unlikely to feel positive towards President Mahama if, in late 2016, they are still coming home to ruined freezers-full of food and blown appliances.  So it seems likely that, next year, the key to power in Ghana will be energy.