President John Dramani Mahama and the US Secretary of State, John Kerry, yesterday witnessed the signing of an agreement between Ghana and the US government’s Millennium Challenge Corporation (MCC) for the release of the second MCC compact of US$498.2 million.
The MCC is investing the amount in the transformation of Ghana’s electricity sector and the stimulation of private investment in the sector.
The 5-year compact, will create self-sustaining energy sector in Ghana.
Ghana’s Finance Minister, Seth Terkper and Chief Executive of the Millennium Challenge Corporation (MCC), Dana J. Hyde, signed the agreement yesterday.
The Ghana Compact is the largest under the Obama administration and overall US assistance.
It is strongly related to good governance by the Mahama administration.
According to Mr. John Kerry, Ghana is a shining example on the African continent adding, that agreement from his point of view takes the enormous partnership between Ghana and the US to the next level.
He was full of praise for the Mahama administration on good governance.
The first compact signed under the Kufuor administration, brought about significant infrastructure projects, including the N1 Highway in Accra.
The MCC is an innovative and independent US agency that is working to reduce global poverty through economic growth.
Created by the US Congress in January 2004, with strong bipartisan support, the MCC provides time-limited grants and assistance for countries that demonstrate a commitment to good governance, investments in people and economic freedom.
President Mahama, who is in Washington, DC, to attend the US-African Leaders Summit, was, on Monday, a special guest, together with the Tanzanian President and Secretary Kerry, at a civil society forum.
He was also joined by the President of Mozambique to discuss Africa’s growth prospects at a forum organised by the USA Chamber of Commerce.
Ghana, last month, hit the final stages of preparation for a second Millennium Challenge Corporation (MCC) funded Compact Programme.
Ghana’s Compact Development Core Team and their MCC counterparts in the last two years, have had many consultations, discussions and workshops to finalize the projects being proposed for the Compact.
These Proposals, have also been guided by the Reports on various project studies and due diligence missions. The Ghana Team has been led by Prof. Sefa-Dedeh and the USA Team by Mrs Deidra Fair James.
The Compact Goal: Poverty reduction through private sector-led economic growth.
Long-Term Program Objectives: Increased private sector economic investment; productivity and profitability of small, medium and large scale businesses and employment opportunities for men and women.
Higher Individual earning potential from self-employment and improved social outcomes for men and women.
The Compact has six projects. These are:
1. ECG Financial and Operational Turnaround Project
2. NEDCo Financial and Operational Turnaround Project
3. Access to Electricity Project
4. Regulatory Strengthening and Capacity Building Project
5. Power Generation Sector Improvement Project
6. Demand Side Management/Energy Efficiency Project
The total Compact Fund from MCC is currently 498.20 million which comprises two Tranches. Tranche 1 of about 308.2 million and Tranche 2 of 190.00 million. Disbursement of Tranche 2 will be determined by performance.
A new feature in second Compacts is a mandatory contribution of 7.5 per cent of Compact Fund by the receiving country. Therefore, for the 498.20 million dollars Compact, Ghana will be expected to contribute 37.37million dollars. This will bring the total Compact II funds to 535.57 million dollars.
Throughout the Compact development process, the MCC has highlighted critical milestones and conditions precedent to the approval of the Compact proposals. These have been in the form of Aide Memoires signed between the Government of Ghana (GoG), represented by the Minister of
Energy and petroleum and the US Government, represented by MCC, in July 2012 and September 2013.
At this stage the most critical are summarized as follows:
1. Complete Private Sector Participation (PSP) analysis for the power distribution sector to inform a mutually agreeable project that could be funded under the Compact;
2. Approve Gas Action Plan;
3. Finalize Jubilee Gas Agreement;
4. Present proposals to substantially reduce GoG arrears to ECG and an implementation plan on the policy to move MDAs to regular and current payment of utility bills.
The Government of Ghana and the MCC, entered into negotiations on the Compact in Washington DC from June 9-13, 2014.
The Ghana Negotiating Team was headed by former Finance Minister, Prof. Kwesi Botchwey.
After a successful negotiation, the Compact was presented to MCC Board of Directors in mid/late June 2014.
The Compact was then expected to be signed (pending MCC Board of Directors approval, Congressional no-objection and Ghana Parliamentary Approval) in August 2014.