The World Bank has announced a $15 million commitment to Ghana under the $150 million Public Financial Management for Service Delivery Program to support the restructuring and financial sustainability of State-Owned Enterprises (SOEs).
Speaking at the “Resetting State-Owned Enterprises for Sustainable Growth and Fiscal Stability” meeting, the World Bank Country Director for Ghana, Liberia, and Sierra Leone, Mr. Robert Taliercio O’Brien, stressed the need for Ghana’s SOE sector to undergo urgent reforms.
These include improving corporate governance, enhancing financial management, and implementing performance incentives for SOE leadership.
The funding is contingent on the State Interests and Governance Authority (SIGA) meeting agreed targets, including the successful preparation and publication of the 2023 State Ownership Report (SOR), as well as the completion of a performance evaluation of 16 SOEs. The World Bank is also supporting broader economic reforms through a $300 million budget support instrument, with a focus on the energy sector.
SOEs’ Financial Burden on Ghana’s Economy
Ghana’s SOE sector has been a major drain on public resources, contributing minimally to the national budget while accumulating significant liabilities. According to the 2023 SOR, total liabilities of SOEs reached GH₵215.5 billion, representing a 21.8% increase from GH₵176.9 billion in 2022.
The energy sector remains the most indebted, with entities such as the Electricity Company of Ghana (ECG), the Volta River Authority (VRA), and the Northern Electricity Distribution Company (NEDCo) accounting for approximately 63% of these liabilities. ECG alone owes GH¢68 billion, while COCOBOD’s debt stands at GH¢32 billion.
Mr. O’Brien stressed that enhancing the performance of SOEs is more critical than ever to reduce their dependence on government bailouts, improve operational efficiency, and generate enough revenue to clear arrears.
Lessons from Global SOE Reforms
The World Bank Country Director pinpointed successful SOE reforms in Latin America and Africa as models Ghana can emulate:
- Chile has set the benchmark in corporate governance by promoting the independence of SOE boards of directors.
- Uruguay improved SOE performance through management agreements with clear objectives, performance targets, and key performance indicators. This led to Uruguay’s energy utility, UTE, paying a $260 million dividend to the state in 2018, in addition to a $194 million contribution to an Energy Stabilization Fund.
- Gambia has successfully reformed its National Water and Electricity Company, reducing transmission losses from 28% in 2015 to 20% in 2020, minimizing blackouts, and improving bill collection.
