The National Democratic Congress (NDC) recently claimed that Ghana lost $2 billion due to the termination of the Power Distribution Services (PDS) concession agreement. But how accurate is this figure?

Background of the deal

The PDS deal was part of Ghana’s commitment under the Millennium Challenge Compact II signed in 2014 with the United States Government, through the Millennium Challenge Corporation (MCC). The agreement sought to introduce private sector participation (PSP) in managing the Electricity Company of Ghana (ECG), with a U.S. pledge of nearly $498 million to improve the power sector.

Initially, the Compact stipulated that foreign entities would hold 80% of the concession, while Ghanaian entities would hold 20%. However, under the Akufo-Addo administration, this was renegotiated to give Ghanaian firms a 51% stake.

In March 2019, the PDS consortium took over operations. Just four months later, the government suspended the concession over suspicions of a fraudulent Demand Guarantee, and eventually terminated the contract in October 2019.

The Cost of Termination

Following the cancellation, the U.S. withheld the second tranche of $190 million in Compact funds.

According to Dr. John Kwakye, Director of Research at the Institute of Economic Affairs (IEA), Ghana potentially lost access to several other international funding opportunities, including:

• $190 million from the MCC (Compact II)
• $580 million potential private sector investment via the concession
• $400 million from a regional power compact
• An additional $500 million World Bank energy-related facility

These figures bring the total potential loss to approximately $1.67 billion, not $2 billion as claimed. Nevertheless, it represents a significant financial setback for Ghana’s energy sector.

Ghana did not directly lose $2 billion in cash. Rather, it lost access to nearly $1.67 billion in funding and investment opportunities due to the termination of the PDS deal and failure to proceed with power sector privatization as required under the Compact.

So while the NDC’s claim is not entirely accurate, it is based on credible estimates of foregone funding, particularly those cited by the IEA.