MCC considers regional compact--Dana Hyde

Millennium Challenge Corporation (MCC) is actively considering a regional compact with countries that have a good track record of compact implementation as its enters into the second decade to expand the set of partners with which it works, Chief Executive Officer of the Corporation, Dana Hyde has told B&FT.

 

“I will say we are actively engaged in considering regional compacts. As you know, markets in West Africa‘s goal is growth and will be looking at the countries together regarding infrastructure, either in power or transportation.

“In the future, we may be seeking from our Congress the authority to undertake regional compacts, and that is what we have decided to think about,” said Ms. Hyde in an interview in Accra while on an official visit to the country to acquaint herself with the progress of the implementation of the second compact grant. 

MCC’s consideration on regional compact has come at a time when many developing economies, especially in Africa, are pursuing regional development approaches based on trade agreements, commercial code harmonisation, customs harmonisation, and among others. 

Regionally focused engagement with eligible countries, according to MCC would facilitate regional trade and help countries benefit from economies of scale or synergies in sectors such as energy and road infrastructure.  

For example, MCC could consider regional investments in power infrastructure to help develop the West Africa Power Pool (WAPP). The lack of coordinated planning and agreement on regulatory mechanisms across WAPP member countries has hampered progress in this effort, but a regional approach, according to concerns would leverage necessary policy reforms and provide the integration needed to help reduce costs and improve reliability for countries in a region such as Benin, Sierra Leone, Liberia, and Ghana.

As MCC often invests in projects like infrastructure that have an inherent regional component, growth constraints are often cross-border in nature, such as insufficient or inefficient trade and transportation infrastructure. 

An amount of US$498 million has been awarded as a grant under the second compact. The first grant under President John Kufuor in August 2006 was for US$547 million, bringing the total in eight years span to some US$1 billion.

Under the second compact which is focusing on energy and power, the country is expected to execute six projects which include a private sector participation in the management of Electricity Company of Ghana (ECG). The ECG financial and operational turnaround project, NEDCo financial and operational turnaround project, regulatory strengthening and capacity building project, and access project. 

Ms Hyde confirmed that Ghana can now officially access the funds for its intended projects for the next five years of the implementation stage of the compact.

“We just reached an important milestone which is the official entering into force, which is when the funds are obligated. As of September this year, all those funds have been obligated and to flow into the workable projects for the next five years.”

The objectives, she said, is only to address poverty and create growth to strengthen utility to have a very viable sustainable energy sector that can deliver on the development of the people of Ghana.

Tracking the progress of the various projects, she confirmed that: “we are on track in trying to make ECG healthy, as the funds were obligated in September. We are on track, and we are now officially at the very beginning of the implementation for the coming five years.

“The process went on for  about three years where there were some joint consultations with various stakeholders and the core principle of MCC is that our partnership will be very countrywide, involving all stakeholders.”

Ms Hyde added: “I have personally taken the time to gather views from the Ghanaian public on how business owners think about the private sector participation in ECG, and how it will improve reliable power supply.

“We went out to the community, and we visited a print shop, and caterer and sat down, and I talked to them and I said tell me what it means for your business to run this printer or to run this oven and they spoke quite a bit about how important it is for them to have a reliable source of energy, what a charisma they need to have a generator.

“Most Ghanaians are optimistic the power compact will inject the needed capital into the ECG to make it productive and efficient for electricity supply.

“What we are seeking to do here in Ghana is to transform the power sector to make it more reliable, to make it more efficient and to increase the access.We had a little bit of an opportunity to see why that is so significant,” adding that, “as I’m here I have been impressed with what I have seen as well as the comment of the government of Ghana”.

She explained that every step on the way had been carefully calculated from data gathered by the corporation in collaboration with relevant authorities to make the compact fair.

“It started with economic evidenced based data. MCC has only one mission and that is to alleviate poverty by creating economic growth and opportunity, so we approach that mission from a data-based analysis. We started three years ago on that analysis and engaged all stakeholders,” she stated.

“The level of investment will improve power generation and will impact on growth and economic development. This is the main reason why I think in the partnership we relied on evidence and data which was shared with all participants.

“We have consulted economist and have invited many in putting this together. The goal is to strengthen ECG. It is not to take over ECG. The object is to strengthen ECG and make it stronger. Change is always difficult so I think we have to continue the dialogue,” she stated.

The Compact which is being implemented by the government through the Millennium Development Authority (MiDA) channelled approximately US$350 million of the grant as an investment into ECG to ensure its operational revival as well as financially more efficient. 

The government signed the Ghana Power Compact with the MCC, an independent United States government agency, on the sidelines of the US-Africa Leaders’ Summit in Washington on August 5, 2014.

The second phase of the compact seeks to finance the country’s irregular and insufficient power supply. It is targeting enhanced distribution system, effecting institutional changes and creating a Power Park to boost energy consumption.

The country’s demand for power is growing at around 10 percent per annum, spurred mainly by rising consumption.

Ghana is one of two countries that have been eligible for the grant since 2004 on a continuous basis, and the country’s performance and indicators continue to be strong.

The five-year compact came into force on February 16, 2007. The agricultural sector was the main focus, but transportation and rural development were also covered. In January 2011, Ghana was re-selected with two other countries for the second compact.

In August 2006, Ghana signed the first compact for an amount of US$547million, making it the third-biggest beneficiary of this initiative by the United States government after Tanzania US$698million and Morocco US$69million.