Ghana Signs For $498m Under MCA Compact II

Seth Terkper Pix The quest by the country to provide efficient electricity supply to spur economic growth received a shot in the arm yesterday, following the signing of the Second Millennium Challenge Compact between the government and the Millennium Challenge Corporation of the USA.

The $498.2 million compact, which will support the transformation of Ghana’s power sector and stimulate private investments over the next five years, represents the largest US government’s transaction under President Obama’s Power Africa Initiative.

The agreement, which was witnessed by President John Mahama and US Secretary of State, John Kerry, was signed by Mr. Seth Terkper, Minister of Finance on behalf of the Government, and Dana J. Hyde, Chief Executive of the MCC, for the US Government.

In his remarks, President Mahama described the occasion as a historic moment between the two countries and expressed the hope that the execution of the second compact would pave the way for greater engagements between Ghana and the USA.

He said the second compact, which would see Ghana contribute about $37.4 million, would not only enhance government’s own efforts at improving the sector, but would, hopefully, accelerate it.

Mr. Kerry, on his part, jovially stated; “This is the Mahama-Obama access care,” adding “We are taking our partnership to a new level with this signing ceremony.”

He noted that the second compact would go a long way to support Ghanaian businesses and enable the government to realise its development targets.

Mr. Kerry stressed that a strong energy policy was critical to accelerated economic growth, and hoped that Ghana would make the most out of the assistance to put its main distribution companies on a sustainable path, and upgrade infrastructure to reduce outages and improve service.

The Second Compact’s goal is poverty reduction through Private Sector-led economic growth, 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 improve social outcomes for men and women.

The compact has six projects: ECG financial and operational turn around; Northern Electricity Company financial and operational turn around; Access to electricity regulatory strengthening and capacity building; Power generation sector improvement; and Penned side management/energy efficiency project.

The total compact fund from MCC is currently 498.20million dollars, which comprises two tranches.

According to the arrangement, Tranche One is about 308.2 million dollars while Tranche Two would be determined by performance.

A new feature in the Second Compact is a mandatory distribution of 7.5 per cent of the compact fund by the receiving country; therefore, for the 499.20 million dollar compact, Ghana would be expected to contribute 37.37 million dollars. This would bring the total Compact II funds to 535.57 million dollars.

Throughout the compact development process, MCC has highlighted a critical milestone and conditions precedent to the approval of the compact proposals.

This has been in the form of aid memoires signed between the government of Ghana, represented by the Minister of Energy and Petroleum, and the US government, represented by MCC, in July, 2012 and September 2013.

Ghana’s negotiation team for Compact II was led by Professor Kwesi Botchwey, former Minister of Finance.

From Samuel Nuamah, Washington DC

 

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