JBICI Research Paper No. 36-3

July 2008

ISSN 1347-5703

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JBICI R

esearch Paper No. 36-3

JBIC InstituteJapan Bank for International Cooperation

July 2008

Aid Effectiveness to Infrastructure:A Comparative Study of East Asia and

Sub-Saharan Africa

Case Studies of Sub-Saharan Africa

Aid Effectiveness to Infrastructure: A

Com

parative Study of East Asia and Sub-Saharan A

frica, Case Studies of Sub-Saharan A

frica

JBICI Research Paper No. 36-3

July 2008

JBIC InstituteJapan Bank for International Cooperation

Aid Effectiveness to Infrastructure:A Comparative Study of East Asia and

Sub-Saharan Africa

Case Studies of Sub-Saharan Africa

JBICI Research Paper No. 36-3

Japan Bank for International Cooperation (JBIC)

Published in July 2008© 2008 Japan Bank for International Cooperation

All rights reserved.

This Research Paper is based on the findings and discussions of the JBIC. The views expressed in

this paper are those of the authors and do not necessarily represent the official position of the JBIC.

No part of this Research Paper may be reproduced in any form without the express permission of

the publisher. For further information please contact the Planning and Coordination Division of our

Institute.

Ernest AryeeteyPeter Quartey

University of Ghana

Aid Effectiveness to Infrastructure:a Comparative Study of East Asia and

Sub-saharan Africa1

Ghana Case Study

1 Mr. Emmanuel Joseph Mensah (ISSER) provided very helpful assistance

i

i

Table of CONTENTS

1. INTRODUCTION ………………………………………………………………………… 11.1 Research Issues ……………………………………………………………………… 11.2 Research Objectives ………………………………………………………………… 41.3 Methodology …………………………………………………………………………… 4

2. PROJECT CASE A: NATIONAL ELECTRIFICATION PROJECT ……………… 62.1 Project Objectives …………………………………………………………………… 62.2 Scope …………………………………………………………………………………… 92.3 Impact of the National Electrification Project …………………………………… 122.4 Factors affecting Implementation and Outcome ………………………………… 212.5 Comparing with Reference Project ………………………………………………… 232.6 Assessment of Donor Policy Influence and Practices on Institutional

Impacts ………………………………………………………………………………… 27

3. PROJECT CASE B: ANWIANKWANTA YAMORANSA ROAD PROJECT ……… 293.1 Project Objectives …………………………………………………………………… 293.2 Scope of the Project …………………………………………………………………… 303.3 Impact of the Project ………………………………………………………………… 313.4 Comparison with Reference Project ……………………………………………… 383.5 Assessment of Donor Policy Influence and Practices on Institutional

Impacts ………………………………………………………………………………… 39

4. CONCLUSIONS AND POLICY RECOMMENDATIONS ………………………… 42

REFERENCES ……………………………………………………………………………… 44APPENDICES ………………………………………………………………………………… 46

ii iii

List of Figures

Figure 1: Anwiankwanta-Yamoransa Road (Project Site) ……………………………… 30Figure 2: O & M Processes in Ghana Highway Authority …………………………… 34Figure 3: Donor Support for Infrastructure Development (2003-2005) ……………… 40

ii iii

List of Tables

Table 1 : Ghana Road Condition Mix ……………………………………………………… 2Table 2 : Road Condition Mix by Region (Paved and Gravel Roads) ………………… 3Table 3 : Areas Connected under the National Electrification Project (NEP) ……… 13Table 4 : Other Electrification Projects Executed (1989 – 2001) ……………………… 13Table 5 : Completed Projects (1990 – 2000) ……………………………………………… 14Table 6 : Other Completed Projects (2001 – 2005) ……………………………………… 14Table 7 : Economic Internal Rate of Return ……………………………………………… 15Table 8 : History of Tariff Reform in Ghana …………………………………………… 17Table 9 : Residential Tariff Structure (Cedis per KWh) ……………………………… 18Table 10: Actual Traffic Volume (1987-1998) …………………………………………… 31Table 11: A-Y Road Traffic Volume by Vehicle Types in Selected Sites ……………… 31Table 12: Interview Survey Major Results (n=150) …………………………………… 33Table 13: Road Fund Revenues by Source (Billions of Cedis) ………………………… 34Table 14: Characteristics of the Accra-Yamoransa Road ……………………………… 38Table 15: Tied and Untied Aid (Bilateral) to Electricity & Roads Sub-sectors

in Ghana …………………………………………………………………………… 40

iv 1

Acronyms and Abbreviations

AGI Association of Ghana Industries

ATL Akosombo Textile Limited

A-Y Anwiankwanta-Yamoransa

CEB Communaute Eletrique du Benin

CP Construction Pioneers

CSA Civil Servants Association

DANIDA Danish International Development Agency

ECG Electricity Company of Ghana

EEIC Energie Electrique de la Cote d’Ivoire

EIRR Economic Internal Rate of Return

FRP Financial Recovery Plan

GoG Government of Ghana

ICB International Competitive Bidding

LRMC Long Run Marginal Cost

LV Low Voltage

MMU Mobile Moving Unit

NDF NORDIC Development Fund

NED Northern Electricity Department

NEP National Electrification Programme

NERSRP Northern Electrification and System Reinforcement Project

OECF Overseas Economic Cooperation Fund

PURC Public Utility Regulatory Commission

SHEP Self Help Electrification Programme

SIDA Swedish International Development Agency

TUC Trades Union Congress

VALCO Volta Aluminum Company

VRA Volta River Authority

iv 1

1. INTRODUCTION

1.1 Research Issues

In the last two decades the development performance of sub-Saharan Africa has

contrasted sharply with that of Asian economies. While their circumstances in the

early post-independence period were generally comparable, this began to change

significantly after the first twenty years. The average GDP per capita in Sub-Saharan

Africa was $703 in 1975 while that of East Asia was $309. By 2001, GDP per capita for

SSA had declined to $460 while that of East Asia had increased to $900 (World Bank,

2003). The trend has not reversed and in 2005, while average GNI per capita2 for

East Asia and Pacific was $1630, that of SSA was $746. There have been suggestions

that the better performance of East Asia in the period could be attributed to more

effective institutions that presided over the transformation of economies and a better

use of resources (Nissanke and Aryeetey, 2003). The effective institutions were able to

attract and make better use of aid soon after independence than in SSA, it is argued.

This allowed the East Asian economies to subsequently reduce their intake of aid by

the mid-1970s. Over the period 1975-2002, total Official Development Assistance and

Official Aid to SSA was $318.8 billion which compares with $214.1 billion received

by East Asia and the Pacific Countries over the same period. The trend of growing

dependence on aid for SSA described above is not different for Ghana; GNI per capita

was $300 in 1975 and by 2005 it had increased to $450. In terms of Official aid,

between 1975 and 2002, Ghana received a total of $11.9 billion in aid (World Bank,

2005). The question is whether increasing aid to Ghana has had the appropriate

impact on economic performance and welfare.

There is a growing view that the differences in outcome between African economies

and East Asian economies can probably best be explained by the institutional

differences in how they managed infrastructure projects supported by aid. Did the

aid lead to better institutions? Some research has shown that infrastructure aid in

Asia has contributed to institutional reform, capacity building and human capital

development of the recipient countries (Arakawa and Wakabayashi, 2006). But

to what extent has this happened in Africa? We use Ghana as a case study of the

question. Ghana’s infrastructure development has not been the best in the sub-region

and this has had serious repercussions on the production, marketing and development

of agriculture in the country. The poor state of infrastructure in Ghana as in many

African countries does not promote effective and competitive agricultural production,

2 Atlas Method

2 3

trade and development. Teledensity is low although it has increased from 1.8 to 3.8

between 2003 and 2005 (ISSER, 2005). In 1996, Teledensity in South Africa was 10.2

as compared 6.02 in Asia and the African average of 1.85 (Jerome, 1999). Telephone

usage and access is urban bias which goes to compound trade in agriculture and agri-

business development. However, the privatization of the telecommunication industry

in Ghana has seen improvements in access and coverage but more particularly the

number of operators in both the fixed line and the cellular networks. However, the

limited telephone infrastructure has affected the potential for internet access and

trade in agribusiness in the country.

Road transport which forms the major means of distributing agricultural products

within Ghana and also for international trade remains to be adequately developed.

A significant proportion of roads in Ghana are not paved and most resources are

channeled into road building than into maintenance. Data on Ghana’s road network

is given in Table 1. There were also disparities in the quality of road in the regions

(Table 2). Generally, about half the network is in good condition and about a third of

the feeder road network is also in good condition. However, transport cost remains a

major challenge to doing business in Ghana.

Table 1: Ghana Road Condition Mix

Year Total (%) Paved (%) UnpavedGood Fair Poor Good Fair Poor Good Fair Poor

2003 29 17 54 42 26 32 17 9 742004 32 16 52 47 24 29 18 8 742005 40 15 46 54 21 25 24 8 692006 50 13 37 63 18 19 33 8 592007 60 14 26 70 17 13 45 9 452008 67 16 17 75 17 8 55 15 31

Source: Ministry of Roads and Transport, Road Sector development Review Report, 2003

2 3

Table 2: Road Condition Mix by Region (Paved and Gravel Roads)

RegionGood Fair Poor

TotalKm % Km % Km %

Ashanti 317 22.4 468 33.2 628 44.4 100Brong Ahafo 465 33.7 276 20.0 639 46.3 100Central 142 17.4 387 47.6 285 35.0 100Eastern 563 45.3 440 35.3 242 19.4 100Gt. Accra 199 50.4 112 28.3 84 21.4 100Northern 606 29.9 604 29.8 815 40.3 100Upper East 134 34.8 139 36.3 111 28.9 100Upper West 97 10.4 281 30.1 555 59.5 100Volta 465 38.5 303 25.1 440 36.4 100Western 284 21.4 303 22.8 743 55.9 100Total 3272 29.4 3314 29.8 4542 40.8 100

Source: Ministry of Roads and Transport, Road Sector development Review Report, 2003

The Ministry of Transport estimates that the costs of freight transport in Ghana

are approximately 12 per cent of final prices, compared to 6-7 per cent in developed

countries. An informal survey on freight charges indicates that, on average, it costs

$1.94 to move cargo by one kilometer in Ghana, compared with US$ 0.09 per kilometer

in the United States and US$1.41 in Nigeria.3 The FIAS regulatory and administrative

cost survey found that the worst external trade barrier for businesses was shipping

and transport costs. Forty per cent of businesses engaged in international trade

claimed that shipping and transportation was either a major or severe problem. The

electricity sub-sector also faces major challenges; transmission and distribution losses

are high; in 1993/94 it amounted to 17.8% in Ghana, as compared to 8% in Zambia,

14.3% in Senegal, and 12.5% in Kenya (Jerome, 1999). The International Energy

Agency (IEA) estimates that in 2004, distribution losses in Ghana accounted for 16.7%

of total final consumption.

Despite these challenges, infrastructure plays a major role in economic development.

It is against this background that the Government of Ghana sought donor assistance

particularly in the 1980s and 1990s to support infrastructure development in Ghana.

However, the outcome of infrastructure aid on Ghana’s development has received little

empirical investigation. The key issue is what were the initial conditions before Ghana

received aid for infrastructure development and to what extent has these funds led

to institutional transformation to ensure sustained growth in Ghana? This forms the

focus of the study.

3 World Bank, 2001

4 5

1.2 Research Objectives

This study aims to ascertain the “processes of institutional changes associated with

the two infrastructure projects and relationships between those institutional changes

to the overall impact of the infrastructure projects”. The study will examine impacts

“related to ideas influencing policy, transfer of knowledge and lessons learned,

organizational capacity to plan, implement and operate, and human resources

development in general.” While previous studies have used macroeconomic analysis

to address this issue, the study intends to use comparative analysis of specific case

studies. It is believed that such an approach will unravel the differences in the

mechanism for transforming aid into long-term growth and poverty reduction which

will then inform policy on accelerating economic growth in Ghana through aid. Thus,

the Ghana case study will focus on aid infrastructure investments and how they

contribute towards long term growth and poverty reduction. The paper hypothesizes

that `the Africa-Asia and Ghana-Asia contrast discussed above and the role of aid, to a

large extent can be explained by differences in the institutional linkages between aid

projects and wider systems at the national level’.

1.3 Methodology

In order to ascertain the impact of infrastructure aid projects on policy reforms,

technology transfer, and human capacity in Ghana two infrastructure projects were

selected based on a set of criteria. Projects are selected based on the five (5) criteria

provided by the project steering committee on page 3 of the terms of reference.

These include (i) Size (ii) Sectors (iii) Number of Cases (iv) Time Perspective and (v)

Financier. Applying the five criteria, two infrastructure projects from two sectors of

the economy; one economic (road) and the other non-economic (energy) have been

selected. The road project selected is the Anwiankwanta-Yamoransa road financed

by JBIC and the other, an energy project, is the National Electrification Project

financed by the World Bank. Both projects are of great interest from an institutional

point of view. For instance, a third component of the energy project was to provide

institutional strengthening of Electricity Company of Ghana (ECG) through

regrouping of all its commercial activities under one directorate and hiring an outside

firm under a performance based management contract to run the newly created

directorate. The road project is also a large one and the only major road linking the

Takoradi Port to the middle and northern part of the country. It also facilitates trade

between Ghana and Burkina Faso (a land-locked country).

The study finds that although infrastructure aid has played a major role in Ghana’s

development, there is considerable room for improvement. It has led to technology

4 5

transfer, institutional capacity building, and policy reforms and improved livelihood.

However, tied infrastructure aid was cited by many stakeholders as a major

developmental challenge in the selected projects. The rest of the paper is organized

as follows: section two discusses the link between institutional developments and aid

effectiveness. Section three presents the National Electrification Project; project scope,

objectives, institutional impact, compares it with a reference project and discusses

how donor influence affected the outcome of these projects. Section three undertakes a

similar analysis of the Accra-Yamoransa road project. The fourth section provides the

concluding remarks and provides policy lessons.

6 7

2. PROJECT CASE A: NATIONAL ELECTRIFICATION PROJECT

Ghana’s total technically exploitable hydro potential is estimated at 10,000 GWh

annually (2300 MW installed capacity), derived mainly from the three major river

systems (Volta, Tano, Pra) in the central and western regions. It is reported that

installed hydro plant capacity is 1072 MW, based on two dams on the Volta River.

Other sites on the Black Volta, Pra, Tano and Oti rivers have been studied to their

full feasibility level. There has been a comprehensive country wide survey of small

hydro potential and some identified sites that can provide economic supply of isolated

centres (World Bank, 1999).

The Ministry of Energy is responsible for petroleum and electricity production

and distribution in Ghana while the Volta River Authority (VRA) and the Electricity

Company (ECG) remain the two dominant power sector entities. VRA supplies

electricity in bulk to ECG, the Volta Aluminum Company (VALCO), several mines

and Akosombo Textile Limited (ATL) and the Akosombo Township. VRA also exports

electricity to Communaute Eletrique du Benin (CEB) and Energie Electrique de

la Cote d’Ivoire (EEIC). Under the IDA assisted Northern Grid Extension Project

of February 1987, the responsibility for generating and distributing electricity

in Northern Ghana was transferred to VRA from ECG. Subsequently, these

responsibilities are handled by VRA’s Northern Electricity Department (NED). ECG

then distributes the electricity it receives from VRA to the rest of the country. Since

the VRA was founded in 1961, it has operated a quasi-enclave within the country with

considerable degree of autonomy. The RCG which is a much bigger organization was

established in 1967 to succeed the Electricity Division of the Ministry of Works and

Housing but had since struggled to become commercially viable.

Electricity accounts for 9.9% of net domestic energy consumption in 1990.

Petroleum products and electricity consumption increased steadily throughout the

1970s and early 1980s despite the deteriorating economy, coupled with subsidized

petroleum products and low real prices of electricity. Consumption declined sharply

after 1982 due to shortages of both petroleum and electricity, but has since recovered

as supply conditions improved (World Bank, 1999).

2.1 Project Objectives

The National Electrification Project, a World Bank sponsored project was approved

on March 4, 1993 and the project ended on 31st 2000 with a total project cost of

6 7

$138 million4. The Implementing agency for this project is the Electricity Company

of Ghana. The Project’s main objectives are to enable the Volta River Authority/

Electricity Company of Ghana (VRA/ECG) to provide electricity from the national

power grid to small urban centres and rural areas through a systematic electrification

programme. The project also aims to rationalize the sector institutions, particularly,

the ECG. The project has three parts, namely, (i) a portion of a time slice of the

investment programme defined under an IDA-financed National Electrification

Planning Study, which will include connection to the national power grid of all the

district capitals that are not yet connected to the grid, (ii) re-enforcement of ECG’s

existing distribution network by expanding sub-stations, and building or replacing

major links between sub-stations; and (iii) institutional strengthening of ECG through

regrouping of all its commercial activities under one directorate and hiring an outside

firm under a performance based management contract to run the newly created

directorate. The cost of the project can be classified under the following components:

(i) National electrification component cost US $ 124.0 million; (ii) the Distribution re-

enforcement component cost US$ 31.6 million; (iii) the Management contract cost US

$5.0 million; and (iv) the Training Studies component cost US $ 5.6 million (World

Bank, 2001).

The inception and subsequent implementation of the NEP followed a study by Acres

International for the Ghana Government. The study culminated in the development of

a 30-year electrification plan (1990-2020) which aimed at connecting all major towns

in Ghana, with a population of 500 or more, to the national grid. The report could

be described as a “master plan” particularly because of its comprehensive nature,

embodying all the necessary information and design (technical, financial, etc) for the

implementation of the project.

ECG’s input into the plan involved the seconding of two employees to assist with the

development of the plan, and also the opportunity to comment on the plan as part of

the consultation processes. Beneficiary communities and districts could only have been

consulted by the consultants as part of the processes for the development and design

of the project. According to ECG officials interviewed, the design of the project came

with the Acres report, which meant that ECG only had to implement its aspect of the

project. The ECG had to communicate with the beneficiary communities as part of the

process to promote household interest and to educate them on the potential benefits of

the project and the need to wire their houses to be connected to the national grid upon

completion of the project.

4 http://web.worldbank.org/

8 9

Based on the Acres’ report, the eligible towns were captured and the overall project

packaged into smaller components for funding. The World Bank sourced for funds for

the different components from the following: the Nordic, Netherlands government,

DANIDA, Swedish International Development Agency (SIDA) and the World Bank.

The ECG financed the local cost component of the project, which amounted to just

about 10 percent of the overall cost. The SIDA and NORDIC assistance came with

the condition that only construction firms originating from the respective countries be

contracted to execute the projects (tied aid) whereas the rest of the project components

were opened up for International Competitive Bidding (ICB). The Ashanti region

component of the project was however deemed small, and therefore a local firm was

contracted to execute it.

On the other hand, the World Bank insisted on ensuring the delivery of quality

work by engaging the services of an international project management firm to assist

the ECG with the execution of the project. For the Urban component of the project,

ESBI consults (Ireland) were engaged while Merc and McLeldan (UK) were also

engaged for the rural component of the project. The strongest contribution from such

international consulting firms is the managerial acumen – which mattered most. The

actual construction work could however be sub-contracted to local construction firms

and that is largely what happened with this project. The ECG has the right of way

during project implementation; thus, usually ECG does not consult communities in the

design of projects. Only marketing officers visit communities to interact and explain

usefulness of the project. Load forecasting is done based on assessment of economic

activities in the community and usually done at the time of the design of the project

(the acres’ study). The objectives of the NES are as follows:

To increase the overall socio-economic development of the nation and create wealth, •

thereby alleviating poverty, especially in the rural areas.

To increase peoples standard of living, especially those in the rural areas.•

To create small-to-medium scale industries in rural areas.•

To enhance activities in other sectors of the economy, such as agriculture, health, •

education, tourism etc

To create jobs in the rural areas and thereby reducing the rate of rural-urban •

migration.

To achieve the objectives, the Ministry of Energy was tasked to coordinate and

execute the implementation of the NES with technical engineering and supervision to

be provided by the Electricity Company of Ghana (ECG) and the Northern Electricity

Department of the Volta River Authority (NED/VRA) in their respective areas of

supervision.

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2.2 Scope

The National Electrification Scheme (NES) was instituted in 1989 as Government’s

policy of extending the reach of reliable electricity supply to all parts of the country

over a thirty-year period, from 1990-2020. The importance of the NES was seen in the

fact that at the beginning of the NES, only 20% of the total population of Ghana had

access to electricity supply. However, for the rural population who form more than

70 percent of the country’s population, accessibility to electricity was only about 8

percent. At the time of enacting the NES policy, 64 out of the 110 district capitals in

the country were without reliable electricity supply from the national grid. Out of this

number, 5 had limited electricity supply from isolated diesel generation sets whilst the

remaining 59 district capitals were without any form of electricity supply.

The National Electrification Master Plan outlines an implementation plan made up

of six 5-year phases spanning the 30 year period. The first phase of the NES, executed

in the 1990’s entailed the electrification of all the District Capitals and towns/villages

on-route to the district capitals. The subsequent phases of the NES outlined the

electrification of communities based on the most economically viable criteria. The

first two-phases of the NES were completed in 1998. At the commencement of the

NES, about 4200 communities were identified as communities having population of

more than 500 and therefore qualified for connection to the national grid under NES.

Between 1989 and 2000, about 1900 towns/villages were connected to the national

electricity grid.

The NESwas financed by the World Bank and other bi-lateral funding agencies as

follows5:

Brong Ahafo, Northern and Upper East Component of the NEP under

World Bank Funding: This component of the NEP, which was executed under the

jurisdiction of VRA, covered the electrification of 13 district capitals and 129 towns/

villages along the supply route. The project was funded by the World Bank at the cost

of US$35.5 million and was executed by Norelec of France and KEC International of

India. The project commenced in 1995 and by end October 1998, all the capitals under

this project were connected to the grid. The entire project was completed in March

2000.

Eastern, Ashanti, Greater Accra, Central, Western, Volta Components

of NEP under World Bank Funding: This component of the NEP was executed

5 These information were obtained from Electricity Company of Ghana (unpublished report)

10 11

under the jurisdiction of the Electricity Company of Ghana (ECG) and it benefited 42

communities in the Eastern Region and 15 communities in the Ashanti Region under

the rural component of the NEP. The project also covered urban communities in the

six (6) regions of ECG under the NEP Urban Project. The project which started in

1996 was financed by the World Bank at a cost of US$42.5 million was completed in

March 2000.

Volta Region NEP Rural Project (NORDIC Development Fund): This

component of the NEP was executed under the jurisdiction of ECG and was initially

funded through the NORDIC Development Fund (NDF) with an initial amount of $ 5.5

million. The project was executed by KL Contractors of Denmark and it entailed the

electrification of 2 district capitals in the Volta Region and 33 towns/villages on-route

to the district capitals under the main contract. This project commenced in 1996 and

was completed in June 1998. Thereafter, an additional fund totaling US$ 1.4 million

was provided by the NDF for the connection of additional 21 communities to the grid.

Work on the additional towns commenced in September 1998, and was completed in

June 1999.

Western Region NEP Rural (Dutch Government Funding - ORET): This

component of the NEP was financed by the Dutch Government (ORET) at an

estimated cost of US$ 31.0 million and was executed by Holec Projects of Holland. The

project covered the electrification of 3 districts capitals, namely, Asankrangwa, Enchi

and Half-Assini, and 96 towns/villages on-route to the district capitals. By the end of

1997 all three district capitals had been connected to the national grid in addition to

60 other towns within the region. The funds provided by the Dutch Government were

able to cover the electrification of 63 towns and therefore the Government of Ghana

had to provide the additional funds and materials required for the remaining 33

towns. The project was completed in May 2000.

Central and Upper West Regions (DANIDA Funded): The Central Region and

Upper West Region component of the NEP were funded by the Danish International

Development Agency (DANIDA) at a cost of US$ 24.35 million and was executed by

Semco/Skansk Jensen of Denmark. The project covered the electrification of 2 district

capitals, namely, Ajumako, Twifo Praso, and 64 other towns/villages in the Central

Region and 3 district capitals, namely, Lawra, Jirapa, Nadawli and 10 other towns/

villages in the Upper West Region. This project commenced in early 1997 and was

completed in September, 1999.

Electrification of Bekwai, Kuntunanse and Other Communities (JICA-1):

This was the first Japanese Government Grant aid for electrification which covered

10 11

2 district capitals, namely, Bekwai and Kuntenase and 29 other communities in the

Ashanti and Central Regions. The project commenced in 1989 and was completed in

1990 with a total cost of US$ 7.8 million.

Electrification of Ada-Foah, Sogakope and Adidome and Other

Communities JICA -2: This involved connecting three district capitals, namely, Ada-

Foah, Sogakope and Adidome and 19 other communities in the Greater Accra and

Volta Regions. The project commenced in 1993 and was completed in 1995, at a total

cost of US$ 17.1 million.

Electrification of Asesewa and Yeji Areas, JICA 3: This project covered

electrification of communites in the Asesewa and Yeji areas. The project was funded

by the Government of Japan with a grant of US$ 10.2 million, and was executed by

the Japanese contractors Nishizawa Limited and Tochs Corporation. The first phase of

the project, that is, the electrification of Asesewa and surrounding areas, commenced

in March 1997 and was completed in December 1997. A total of 21 communities

benefited from Phase-1 of the project. The second phase of the project which involved

the electrification of Yeji and surrounding areas, commenced in March 1997. A total

of 13 communities benefited under the Phase-2 project, which was completed in

September 1999.

Electrification of Nyinahin and 23 Surrounding Communities under

Japanese Government Grant Financing, JICA 4, Phase-1: The project connected

Nyinahin and 23 other communities in the Atwima District of the Ashanti Region to

the national electricity grid. The amount involved was US$ 6.3 million with a ¢7.5

billion Ghana Government component. The project was executed in 2003.

Electrification in the Amansie West District under Japanese Government

Grant Financing, JICA 4, Phase-2: The project connected 10 communities in the

Amansie West District to the national grid. The amount involved was US$ 2.6 million

and the project was executed in the year 2004.

Juabeso-Bia Electrification Project: This project covered the District capital of

Juabeso-Bia District namely, Juabeso and 33 other communities in the Juabeso-Bia

and Sefwi-Wiawso districts. The project commenced in 1992 and was completed in

1994. The project was funded by the Government of Ghana.

Electrification in the Greater Accra and Volta Regions: This project initially

covered the electrification of 63 towns/ villages in the Volta Region and 13 towns/

villages in the Greater Accra Region. The project was funded by the Swedish

12 13

Government through the Swedish International Development Agency (SIDA) with

an initially amount of US$ 8.3 million and was executed by a Swedish Contractor,

Transelectric AB. Works under the main contract commenced in October 1997 and

was completed in October 1999. A supplementary amount of US$ 2.47 million from

SIDA was used for the electrification of additional 34 towns in the project area, which

commenced in May 2000 and was completed in Mid-2001.

Upper East Electrification Project: This project was funded by the Spanish

Government and it covered 51 communities in the Upper East Region of Ghana. A

concessionary loan amounting to US$ 10 million was secured by the GOG to undertake

the project. The project commenced in June 1999 and was completed in December

2000. Installation works on the project were carried out by Elecnor of Spain.

Electrification in the Western Region under EU Grant Financing: This

project connected 108 communities in eleven Districts in the Western Region to the

national grid with European Union Grant Aid of € 10 million. The project commenced

in July 2001 and was completed in July 2004. Norelec of France executed the work.

Electrification of Volta Lake Resettlement Townships under Chinese EXIM

Bank: This project connected 144 communities in the catchments area of the Volta

Lake Resettlement Townships to the national grid at the cost of US$ 32.8 million

from the Chinese Exim Bank. The project was executed by China International Water

and Electric Corporation. Extension of the national grid to the 144 communities was

completed in 2003. Currently, about 580 communities throughout the country will

be benefiting from the China International Water and Electrical Corporation’s credit

facility of $81 million. Government of Ghana will make a counterpart contribution of

$ 9 million making a total of $ 90 million. The Government of Ghana’s contribution is

covered under the 2007 budget.

2.3 Impact of the National Electrification Project

The study examines the impact of the two infrastructure projects in terms of

effectiveness, ideas influencing policy, transfer of knowledge and lessons learned,

organizational capacity to plan, implement and operate, and human resources

development in general.

Effectiveness

Before the commencement of the NES only about 480 towns were connected to the

national grid. Since the commencement of the NES in 1989, about 3000 town/villages

in all parts of the country have been connected to the national electricity grid as of

12 13

September 2005. These include towns under the main NES Programme as well as the

SHEP (Tables 3, 4, 5). Accessibility to electricity increased from 15 percent in 1989 to

43 percent in 2000 according to the 2000 population census. At present, it is estimated

that accessibility is in excess of 45 percent.

Table 3: Areas Connected under the National Electrification Project (NEP)

Region District Capitals Other Towns TotalAshanti 0 15 15Central 2 64 66Eastern 0 42 42Volta 2 54 56Western 3 93 96Upper West 3 10 13Brong Ahafo - - -Northern and Upper East 13 129 142TOTAL 23 407 430

World Bank, 2001

Table 4: Other Electrification Projects Executed (1989 – 2001)

Name of Project YearNo. of Dist. Capitals

Other Towns Total Region

Juabeso-Bia Electrification Project 1992-1994 1 33 34 Western

Hohoe/Jasikan Electrification Project 1993-1995 2 31 33 Volta

Grid Extension from Dodowa-Kordiabe-Agomeda 1993-1995 0 8 8 Gt. Accra

Ashanti Region Electrification Project 1993-1995 4 48 52 Ashanti

Eastern Region Electrification Project 1993-1995 2 24 26 Eastern

JICA I Project 1989-1990 2 29 31 Ashanti-CentralJICA II Project 1993-1995 2 19 21 Gt. Accra/VoltaGt. Accra Electrification Project 1996-1998 0 13 13 Gt. AccraVolta Reg. Electrification Project 1996-1998 0 63 63 Volta

JICA III Project1997-1999 0 21 21 Eastern1997-1999 0 13 13 Brong Ahafo

Gt. Accra/Volta Region Electrification Project (Extension)

2000-20010 10 10 Gt. Accra

0 28 28 Volta

Upper East Electrification Project 1998-2000 0 52 52 Upper East

TOTAL 13 392 405World Bank, 2001

14 15

Table 5: Completed Projects (1990 – 2000)

Project Package Number of TownsNational Electrification Project (NEP) 430Other Projects 405SHEP 1 50SHEP 2 250SHEP 3 Phase-1 280SHEP 3 Phase-2 494Total of Completed Projects under NES 1909

World Bank, 2001

Table 6: Other Completed Projects (2001 – 2005)

Project Package Number of Towns

Number Completed

SHEP 3 Phase -3 700 573SHEP 4 Phase-1 193 17Electrification of Volta Lake Resettlement Townships 144 144EU Funded Electrification Project (Western Region) 108 108Electrification of Nyinahin and 23 other towns 24 24Electrification in the Amansie West District 10 10Other Electrification Projects 364 204Total Projects under NES 1543 1080

World Bank, 2001

According to the VRA evaluation report, the project objectives have been fully

met with the provision of 881 km route transmission lines and the electrification of

16 District Capitals as well as 127 other rural communities. It is reported that the

project provided electricity to more than 99% of the communities that were planned.

However, the achievement in terms of the number of customers that were connected

was moderate, especially in the Northern Region (World Bank, 2001). This is due to

the ethnic conflict which affected areas covering 20 towns out of 48 towns electrified in

the region. The conflict resulted in the relocation of people from the area, damage to

property including houses, and disruption in economic activities.

At appraisal, the economic internal rate of return (EIRR) was estimated for major

sub-projects for VRA and ECG investment programmes. However, because the project

encountered an unexpected shortage of construction materials and other factors,

actual implementation of the investment programme was delayed substantially.

Consequently, the EIRRs were calculated based on the revised time-slice. Despite the

delay in project implementation, the actual EIRRs were higher than the appraisal

14 15

estimates due to substantially lower costs and larger electricity consumption than

originally anticipated. Table 7 compares the EIRRs at appraisal and completion for

major sub-projects.

Table 7: Economic Internal Rate of Return

Region EIRR at Appraisal (%) EIRR at Completion (%)Northern Region 5.5 8.3Brong Ahafo Region 12.6 16.7Eastern Region 12.7 29.7Western Region 13.5 19.7

Source: World Bank, 2001

The social, economic and commercial activities of these towns has also been

enhanced which has led to a decline in the drift of the youth from the communities to

urban centres. The project with the assistance of a contract administrator from Acres

International Ltd, Canada, was implemented within the estimated costs and schedule

(VRA, 2000). The project marked the second time in the history of the World Bank

Office in Ghana that a project of this nature was managed in-house. The experience

gained in the execution of the project was subsequently passed on to other staff

members of VRA which led to significant capacity-building.

Sustainability

According to the project completion report, the overall sustainability of the project

is uncertain. The economic viability of the project was computed without taking

into effect the negative environmental impacts and by applying the conventional

technical approach. Also, the financial appraisal report presents a gloomy picture and

questions sustainability. Financial performance targets were set requiring VRA and

ECG to achieve (i) rates of return on revalued assets at 8% annually; (ii) debt service

coverage ratios of at least 1.5 times. Also, ECG was expected to reduce and maintain

its accounts receivable at no higher than 45 days sales revenue. The formulation of

a financial recovery plan (FRP) in 1998 did not turn things round; it was partially

implemented and the tariff component was not pursued after the initial increases

in 1998, despite 30% depreciation in the Cedi. To date, tariff increases have been

delayed and government has been subsidizing utility companies. Thus, the overall

sustainability of the project is uncertain unless government continues to support it,

especially when the project is being extended to rural areas with less customer density

and demand.

It must be added that currently there is considerable government subsidy to utility

companies, especially the electricity sub-sector. For instance, the overall fiscal drain

16 17

of the electricity sector had become substantial; in 2002 deficits of the three electricity

companies (VRA, ECG, NED) approached 11% of Government spending, or 4% of

GDP. From a deficit of US$204 million, US$124 million alone stemmed from interest

and exchange rate losses. This financial situation significantly affected the utility

investments and resulted in inadequate generation reserve, transmission network

constraints, overloaded transformers, and degraded distribution networks to mention

but a few. All these reduced the quality of service to customers, particularly in the

more populated areas in Ghana. Ageing equipment further increased system losses,

and indirectly added to the cost of production and distribution of electricity. If full cost

recovery as well as full debt service were to be included, total costs would be near USD

0.08 – 0.10 per kWh in 2003 (Keener and Banerjie, 2005).

Attempts to reform electricity tariffs in Ghana are not a recent phenomenon and in

fact predates other major reform initiatives in the power sector. There is a long history

of attempts to reconcile the desire to have tariffs that reflect economic costs and yet

that are affordable to consumers. Tariffs that adjust regularly to reflect fluctuations

in costs (such as exchange rate or inflation) were implemented between 1994 and

1997. In pursuance of the agreement to ensure that tariffs approximate the Long Run

Marginal Cost (LRMC), the GoG continued to increase electricity tariffs without any

opposition until an increase of over 300% in May 1997 provoked intense nationwide

protest with the Association of Ghana Industries (AGI), the Trades Union Congress

(TUC) and the Civil Servants Association (CSA) at the forefront. Consequently, draft

legislation was enacted to establish an independent regulatory agency called the

Public Utility Regulatory Commission (PURC) bill became law. Shortly thereafter, in

October 1997, and an eight member PURC board was sworn in on November 10, 1997

(Table 8).

16 17

Table 8: History of Tariff Reform in Ghana

Year Event1976 – 1986 No changes in tariff1986 Coopers & Lybrand first major tariff study. Study recommends tariffs based on

Long-Run Marginal Cost (LRMC), classifying consumers based on groupings of consumers who impose similar costs on the systems, and grouping residential consumers by level of consumption. Progressive with lifeline consumption of 50 kWh applying to all consumers. Also adopted uniform national tariff structure.

1988 The level of tariffs recommended by Coopers and Lybrand was substantially adopted and approximated 75% of LRMC

1989 Tariff increases, ranging from 6% for low-income consumers to 20% for non-residential consumers, were implemented in order to enable VRA to continue to earn 8% and ECG a 6% Rate of Return. However, in fixing the tariff, the GoG expressed concerns at the prospect of further adjustments to domestic tariffs to reflect recent devaluation and inflationary pressures at a time when the service remained unreliable. The GoG expressed the wish to re-examine certain aspects of the 1986 tariff study, and this led to commissioning of next major tariff study (ACRES).

1990 - 1992 ACRES study points out that the inverted block rate structure recommended by Coopers and Lybrand was cumbersome to administer and a source of customer discontent. Recommended adoption of “adjusted LRMC” – LRMC adjusted to reflect the financial requirements of the utilities. Recommended merging of all residential tariff structure into a single energy rate with the exception of the lifeline tariff. New electricity tariffs introduced in January 1992 based on the recommendation of ACRES International, which was actively supported by the World Bank.

1993 The GoG agrees to adopt a formula-based approach to tariff adjustment and provide for the regular and systematic adjustment of the tariff thereafter on the basis of the agreed formula. Essentially, the formula provided for phasing-in prevailing tariff to LRMC adjusting for inflation and exchange rate movements. Tariff increases were implemented in January 1993 and an agreement reached for further increases in 1994 and 1995 within the framework of this agreement.

1994-1997 Tariffs continue to increase per the agreed formula, although the focus is on a set Rate of Return for the utilities rather than LRMC.

1997 Tariff increases of over 300% prompted nationwide protest. President Rawlings suspends increase until a regulatory commission (PURC) is formed. In response PURC was formed and placed in charge of tariff setting rather than Parliament.

Feb. 1998Sept. 1998May 2001

PURC Tariff Adjustments

2001 PURC outlines a Transitional Plan for tariffs to cover 2001 – 2004, including regulations for consumer consultation on tariffs

2003 January - Tariff formula allowing for automatic adjustment to reflect exchange rate and inflation is enacted and supposed to take effect July 2003. October, 2003 - First automatic adjustment of the tariff per the formula.

2005 PURC scheduled to carry out major tariff reviewSource: Keener and Banerjie, 2005

18 19

The residential tariff structure has moved from 5 sub-groups based on levels of

consumption, to four and then three during the 2003 tariff review process. The lowest

group often called `the lifeline’, offers a flat rate to customers consuming 50 KWh per

month or less, and was originally created to minimize the cost to the utility of billing

small accounts. Starting from August 2002, the Government of Ghana introduced a

subsidy for those consuming within the lifeline, and it came to be used as a tool for

ensuring that lower income users were protected from tariff increases. When the

automatic adjustment formula for tariffs was set to start in 2002, the GoG increased

the subsidy on the lifeline to protect this block from the automatic adjustment but

the adjustment to the formula did not take effect until October, 2003 (Keener and

Banerjie, 2005)

Table 9: Residential Tariff Structure (Cedis per KWh)

KW/month Feb. 98 Sept. 98 May 01 Aug.02 ** Mar 03 Oct 03 ***0-50 ¢/Month 2000 4000 7800 9000 13000 130000-50* 87 174 339 391 565 56551-300 50 120-150 242-304 400 550 610Over 300 75-180 220-350 570 960 960 1065

Source: PURC, 2003 & Cited in Keener and Banerjie (2005:4). * Is a flat rate, assumes average consumption levels of 23 kWh/month** Government subsidy of ¢5000 begins*** Government Subsidy increased to ¢6080 to keep lifeline constant

By 2005, tariff increases had brought the average end user tariff to the point that

they covered the PURC-defined economic costs which do not include an allowance

for current inefficiencies; which is estimated at 2 US cents/kWh (PURC 2002).

Subsequent financial analysis of the sector indicated that the middle tariff band (51

– 300 kWh) was paying below the actual average cost and therefore they were being

subsidized as well as the lifeline band.

Policy Reforms

The implementation of the energy project led to some policy reforms. First, contrary

to previous norms, under the energy project, the Electricity Company of Ghana

(ECG) now sends marketing officers to interact with communities’ way ahead of the

project completion. This has also informed government policy to absorb a significant

fraction of the connection fees since communities now make marginal contributions

towards the cost of connecting to the national grid, particularly under the National

Electrification Programme (NEP). Secondly, an international consultant was hired

to update the electrification plan and ECGs technical specifications for distribution

works. However, although the design and implementation of the pilot programme to

promote productive uses of electricity was not implemented, it is being undertaken as

18 19

an integral part of the implementation of the EC funded rural electrification for the

Western Region which commenced in June 2000 (World Bank, 2001:7).

Although the project alone cannot take full credit for the energy sector policy

reforms outlined by the GoG in 1996-2000, the NEP can partly be credited for the

reform (Statement of Power Sector Development Policy) which seeks to among

others privatize ECG and the unbundling of VRA (World bank, 2001). Another policy

issue relates to the implementation of the SHEP (GoG financed) alongside the NEP

(Donor financed) which created some problems due to the differences in the financing

arrangement. While beneficiaries of NEP pay virtually nothing to access the national

grid, customers captured under SHEP require some minimum contribution before

being assisted to get connected. Thus, where a SHEP-community gets to know that

the connection fee is free for nearby communities under NEP they become dissatisfied.

This creates the impression that some communities are more favoured than others

which brings suspicion and social tension. Currently, there are discussions to

harmonize the two arrangements.

Technology Transfer

Lessons drawn from field interviews on the two infrastructure projects are: first,

there was significant technology transfer but higher at the lower level of manpower

than at the higher levels of manpower. In the case of the energy project, foreign

employees involved in the execution of the ECG component of the NEP could only

be about 5 percent and they were mainly managerial staff. The local experts and

contractors largely lack the organizational skills and operational efficiency necessary

to respond to the challenges of project implementation (they are quite unprofessional).

In the instance of the ECG’s rural electrification project, only two expatriates were

sent down by the assisting consulting firm. They served as the Project Managers who

worked with the local Project Manager and the Construction Supervisor.

In terms of work output, all the two expatriates were highly experienced and

brought onto the project a high level of experience and knowledge in procedures for

the management of the project. Knowledge transfer was significant. For instance,

an innovative technology using the shieldwires of a 161kV transmission lines to

carry power was applied to serve 14 communities in the Brong Ahafo and Northern

regions. The use of the shieldwires also led to a 50 percent reduction in investment

cost as compared to conventional technology (World Bank, 2001). There was high

level of interaction between the foreign experts and their local counterparts. The field

interview revealed that at the time of the project implementation, the local Project

Management had no in-depth experience with the management of projects of such size.

Following the implementation of the NEP project over the 4-year period, the Manager

20 21

is now able to handle any major project. Recently, he managed a $15 million project to

upgrade ECG’s distribution systems while another project, amounting to about $155

million has been lined for implementation. Also, capacity development within ECG

during the project implementation stage has enabled the company to redeploy those

employees that worked on the project to the regions, to be called back whenever the

need arise, thus creating further impact downstream.

Capacity Development

The arrangement between local and foreign contractors has worked very well in

terms of local capacity building. For instance, under the distribution reinforcement

component, a 161/34.5kV, 13.3MVA sub-station with seven radial sub-transmission

lines was constructed at Yendi in the Northern was executed using local installation

contractors (World Bank, 2001). Local contractors or workers were supervised by

the expatriates during the implementation and they delivered timely and standard

outputs. If left to them alone, this would not have occurred. Thus, local contractors

when sub-contracted, they should be supervised to execute projects to satisfaction.

Generally, local contractors have serious limitations in terms of managerial skills and

therefore very few are capable of executing projects on `supply and erect’ basis. They

generally do well when sub-contracted and strictly supervised. With NEP, the only

local-foreign partnership had serious problems arising from the lack of understanding

on the management procedures and this hampered the progress of that project.

Nevertheless, all the other projects undertaken by the local contractors were done

satisfactorily.

Management capacity was also improved. For instance, in order to achieve

improvement in ECG’s operational efficiency and strengthen its commercial

operations, a performance- based management contract was instituted. At the end

of the contract, it was reported that commercial losses had reduced by 3%; debtor/

sales ratio decreased from 198 days to 109 days; an organizational structure of

decentralized and efficient customer service was established and accurate bills

produced before the next month’s meter reading is undertaken (World Bank, 2001:6).

Other capacity building components include a pilot programme for pre-payment

metering and training studies, staff training in finance, audit system planning and

utility management which was partly completed. According to the project completion

report (World Bank, 2001), some ECG’s senior management visited foreign utilities to

become familiar with divestiture and utility management programmes.

However, the VRA Engineers hold the view that the VRA was capable of planning,

implementing and managing the project. The VRA developed sufficient capacity

during the implementation of the Northern Electrification and System Reinforcement

20 21

Project (NERSRP) in the 1980s. During the NERSRP, two consultants on the project

were retained by VRA, and upon the inception of the NEP, one was seconded to the

project. This proved most useful in managing the interactions with the external

agencies, especially the donors

Institutional Changes

According to the project completion report, there was a pilot programme for pre-paid

metering and training studies. The programme introduced a pre-payment metering

system in the VRA/NED operational area in the four regional capitals of Sunyani,

Tamale, Wa and Bolgatanga. Staff training in finance, audit system planning and

utility management was partly completed. Also, discussions with stakeholders

involved with the energy project revealed that initial attempts were made to

implement some institutional reforms in 1997/1998. The reform proposal came as part

of the conditions for financing the GDAP project by international donor agencies but

it did not take off primarily due to the change in government. It is however expected

to come on board soon otherwise no major institutional change has occurred over the

past 10 years. There are also suggestions of Management Service agreements to be

arranged for ECG but yet to take off.

Other Impacts

The usefulness of the project to the communities is immense. Most significantly,

since all major services such as education, health care delivery, water supply and

communication depends extensively on electricity, the energy project undoubtedly

enhanced the provision of such services in the beneficiary districts. Again, until the

execution of the project, most professionals had difficulty accepting postings to those

districts due to the absence of electricity and the services that came with it. Following

the implementation of the project, the situation has changed and professionals now

adopt different attitude when posted to such districts. Therefore, electricity connection

served as an important catalyst in boosting economic activities in the communities.

It is also suggested that women are now able to make optimal use of their time

during the day while domestic activities such as cooking etc are undertaken in the

evening. At the community level, some of the benefits arose from the casual jobs

generated by the construction activities and the contribution it made to the local

community, especially the demand for services along the road. Also, camps created

by the construction firms also provided significant boost to economic activities in the

communities.

2.4 Factors Affecting Implementation and Outcome

This can be discussed under factors outside the control of government or

22 23

implementing agency; factors generally subject to government control and factors

subject to implementing agency. First, in terms of factors outside the control of

government, the shortage of wood poles and other construction materials

The main factor which was subject to government control which significantly

affected the project has to do with tariff adjustment. The government was slow

in increasing tariffs in response to the devaluation of the Cedi and the resultant

inflation. There were attempts to increase tariffs in early 1997 but this met stiff

opposition from the public through demonstrations and the increases were suspended.

Consequently, legislation to set up autonomous regulatory bodies was fast tracked and

the Public Utilities Regulatory Commission (PURC) and the Energy Commission were

established by the end of 1997. Subsequently, the average tariff was increased by

more than 200% in 1998. However, PURC did not approve new increases until April,

2001 despite substantial depreciation in the currency and inflation in the intervening

two years. As a result, the financial position of the utilities companies has deteriorated

significantly by early 2001. This led to substantial project implementation delays and

therefore the expiration date of the Credit had to be extended for 18 months in order

to compensate for the lost time due to the delay.

Stakeholders interviewed reported that undue influence from political offices was

not recorded. However, the use of infrastructure projects to reward towns and cities

who are party faithful remains a major challenge. For instance, beneficiaries of donor

funded energy projects are required to contribute towards the connection to the

national grid while beneficiary communities of government funded energy projects do

not. However, in terms of project execution, since the VRA had signed a subsidiary

agreement with the World Bank on the project, the agency could operate transparent

processes without any pressure from political offices. Moreover, all the donor

institutions had clearly stated guidelines on the execution of their projects, which

were adhered to. Evidence the field interview indicates that no interference could

have been entertained from any source. The constraint however arose when in certain

special cases the need to modify those procedures became inevitable since these offices

strictly adhered to their procedures.

Another major challenge identified relates to disputes regarding chieftaincy in some

beneficiary communities. This delayed commissioning of projects. In Drobo (Brong

Ahafo), Gambaga and Narigu (Upper East Region) for instance, existing chieftaincy

disputes led to delays in commissioning completed projects and subsequent extension

of networks in respective cases. In the Northern region, 20 towns out of 48 towns

were not electrified due to ethnic conflict (World Bank, 2001).

22 23

There was limited success of ECG’s contract management component of the project

and it continued to experience managerial weaknesses in customer services, especially

with respect to difficulties in bill collection and high system losses. To date, these

issues continue to face the organization’s management. Although the project comprised

of an option to strengthen ECG’s technical and project management capacity, as the

volume of work load grew, capacity constraints in project contract management led to

delays in some of the contracts and this led to the 18months extension.

2.5 Comparing with Reference Project (The Self Help Electrification Project - SHEP)

The SHEP aims to extend electricity to rural communities which are located within

20km of existing 33 or 11 Kv network, and through `Self-Help’ provide some of the

material inputs required to electrify their own areas. Government provides matching

funds assistance to link the towns and villages to the national grid. Towns and

villages wishing to be connected should be willing to purchase all the low voltage poles

required for the project and must ensure that a minimum number of houses within

the town or village are wired up and ready to receive electricity. It was also decided

that anybody who wires his or her house and applies for connection within 18 months

from the date of commissioning electricity supply in the area pays a flat connection fee

of five thousand Cedis or five Ghana Cedis (Gh¢ 0.50).

The government’s Self Help Electrification Programme (SHEP) is a complementary

activity to the plan outline in the National Electrification Master Plan. Under the

SHEP, communities which are 20km from an existing 33KV or 11KV network, and

have procured the Low Voltage (LV) poles required for the electrification of their

communities, qualified to benefit under the SHEP. Thus far, phases 1 and 2 have been

completed while phase 3 is on-going with about 4000 communities in Ghana being

connected under the NES. Consequently, access to electricity had grown from about

15 percent of the population at the inception of the NES to the current level of over

45 percent. As part of the Government’s efforts to deepen the NES programme, the

Ministry of Energy had carried out studies for the fourth phase of the SHEP. A total of

about 2500 communities had been identified to be connected to the national grid under

this phase. The total cost of the networks under this phase was estimated at US$ 350

million.

There has not been an official evaluation of the Self Help Project except for an

evaluation of the Lower Volta component supported by Japanese Aid. This component

of the SHEP aims to provide power at the downstream of the Volta through towns

like Sogakope, Adidome and Ada Foah in order to connect three district capitals to

the national grid. The overall goal of the project is to ensure that living standards

24 25

are improved for residents in the targeted regions and also their local economies are

revitalized. The project scope covers three district capitals and twenty villages and it

cost 1,876 million Yen.

Effectiveness

The project managed to provide electricity to the three district capitals and 20

villages in addition to connecting 42 other villages as at the end of 2002. According

to JICA (2007), a total of 9,400 electric meters were installed in the project area

and altogether, 60,000 people have benefited from the project. Consequently, public

services such hospitals and health in have been connected to the national grid and

therefore these services (medical etc) were provided on a 24 hour basis which has

led to significant increases in the number of patients attended to in these health

facilities compared to what prevailed previously. For instance, according to a JICA ex-

post evaluation report on three hospitals and a health post surveyed, the completion

of the project enabled the authorities not only to procure more medical supplies but

also managed to properly preserve items such as vaccines and other perishable drugs.

Besides, the cost of power became more affordable compared to other sources of power

such as diesel and other power generators. JICA (2007), reports that the electrification

rates in the elementary and middle schools were lower compared to the high

schools; all the high schools were connected. However, although all high schools had

electricity, the electrification rate for elementary and middle schools in the targeted

region was only about 20%. Nevertheless, it has enabled students to make efficient

use of electrical appliances in experiments and workshops in addition to the use of

modern ICT. It has also enabled more water pumping plants to be built and existing

ones made to function efficiently in these communities. For instance, the Ghana

Water Company Ltd. built a water treatment plant in Sogakope and Ada Foah, which

supplies water from these two cities to ninety villages and towns. Besides, the stable

power enjoyed by these communities facilitated its smooth operation.

Another interesting finding is that although many farmers in these communities

recognized the importance of irrigated agriculture and therefore expressed interested

in developing one, only a few practiced irrigation using electric pumps similar to

what is being used in large-scale commercial farms as well as in the government’s

rice cultivation project. Since the introduction of electricity, diesel generators were

no longer in use and this has facilitated environmental friendly irrigated agriculture

in the area since noise and exhaust gas have been eliminated. Besides, efficient use

of motors and processing machinery which often suffer from power fluctuations have

benefited from stable power. It was also reported that there has been positive spill

over effects on management performance. Despite these positive spill-over effects,

much cannot be said about the processing of agricultural products. JICA (2007)

24 25

reports that, two large salt manufacturing companies who also happen to be high

consumers of electricity have discontinued operations as a result of land litigation

problems while another company had continued operations but with no increase in its

scale of production or management.

The report further indicated that there has been a significant increase in the number

of commercial activities in the beneficiary communities. Small-scale businesses such

as restaurants and general merchandisers have expanded their operations within

the municipalities. These businesses were set up by both the local people as well as

by people who have moved from large cities such as Accra. A major development

is the setting up of a local FM radio station which supported the dissemination of

information such as announcements concerning educational programs, medical

services, elections and commercial adverts to mention but a few. All of this has been

facilitated by the stable power supply enjoyed within these communities.

Sustainability

Sustained power supply to the targeted areas is anticipated but that depends on

whether revenue generated will be enough to cover costs and maintenance. It is

interesting to note that stable power supply has been recorded in these areas. JICA

(2007) reports that `the stability of electricity supplied to the Asiekpe substation and

the secondary Sogakope substation which is the feeder station for electricity from the

national grid to the targeted regions is extremely high’. Also, evidence at the Volta

River Authority’s high-tension transmitting station indicates a high power stability

rate of around 98% (JICA 2007). Unfortunately, the stability of power was adversely

affected by less rainfall between 1998 and 2001 and this led to nationwide scheduled

blackouts. However, the situation was restored in 2002 and electricity has since

been supplied on a 24-hour basis except during the load shedding period in 2007. It

is important to add that records from the Electricity Corporation of Ghana (ECG)

points to some degree of power outages to low-end consumers. For instance, supply

rate was 95% in Sogakope and 80-85% in Ada, indicating some blackouts. Generally,

power supply has been stable and has improved over the years and therefore it can

be concluded that the project is sustainable. In terms of project management and

reforms, after the completion of the project, the Volta River Authority and Electricity

Corporation of Ghana started to decentralize. As a result, the Electricity Corporation

of Ghana was privatized in 1997 and named the Electricity Company of Ghana.

Nevertheless, the government continued to hold all of its stock, and therefore it

remained a government organization. Besides, there was no change in its functions; it

continued to generate and distribute electricity in the project’s targeted communities.

The Electricity Corporation of Ghana in order to meet the needs of the target

communities in 1998 set up a new office in Sogakope and consequently the number

26 27

of staff in charge of the project area increased from 38 in 1998 to 50 in 2002 (JICA,

2007).

Another major institution involved in the generation and distribution of power is the

Volta River Authority. It is mainly responsible for the maintenance of `high-tension

transmitters (66kV) and the upstream substations, and inspects the high-tension lines

twice a year and the substation at least once a month’. However, Lower tension power

lines (33kV), substations and facilities for power distribution to individual consumers

are the responsibility of the Electricity Corporation of Ghana. Despite the enormous

role played by ECG and VRA in the production and distribution of power to low end

consumers, a major challenge faced by these two institutions is low electricity fees,

high delinquency rate for payments and the high rate of stolen electricity (JICA, 2007).

For instance, the expenditure reports of the Ho office of the Electricity Corporation

of Ghana’s which has jurisdiction over the project’s target regions indicated that this

regional office had declared a deficit for four of the five fiscal years since 1997. This

clearly questions the financial sustainability of the project.

However, aside financial sustainability issues, the project outcomes were met and

a major factor identified as key to promoting the outcome of the project relates to

the financing of the project. Under the Self Help Electrification Programme (SHEP),

residents were required to provide 90% of the utility poles while the government

provided the rest including the transmission equipment and materials as well as the

construction. All these were meant to reduce the financial burden on government

and also increase the number of villages to benefit from the scheme. Although this

strategy worked, the project also came with its own challenges. First, the power lines

in the Ada region were often damaged by salt water in view of its proximity to the

ocean. Consequently, the area recorded some power outages. Besides, the utility poles

were made of wood and were prone to bushfires which aggravates the power instability

problem in these villages. As mentioned earlier, there was little progress with

agricultural processing and a major reason has been due to the type of transformers

installed in these villages. `Agricultural production equipment requires three-phase

transformers especially machines used in producing cornmeal, but some villages only

have single-phase transformers’ (JBIC, 2007). The three-phase transformers are

expensive and often not easy to come by compared to the single-phase transformers.

Despite these shortcomings, the project was able to stabilize power supply to

beneficiary communities made up 65 villages, including municipalities, with an

estimated 60,000 beneficiaries (JICA, 2007). This accounted for about 40% of

population of the target regions. In order to consolidate the gains made, it is necessary

26 27

that the Electricity Corporation of Ghana regularly cleans its transmission facilities

(this indicates pin insulators, the nonconductors of the transmitters) at least once

a month to stabilize the supply of electricity in the targeted areas. Besides, for the

project to realize its full benefit, it is important that three-phase transformers rather

than single-phase transformers are installed. This will significantly promote the

processing of local agricultural products in addition to promoting the spillover effects

of electricity these regions.

In comparing both energy projects, it is obvious that SHEP complemented NEP in

many respects and ensured that power was extended from main lines to rural areas.

However, the two projects operated under different policies; whereas beneficiaries

under NEP do not contribute 90% of the poles, those under SHEP were required to do

so. Although this ensured that more towns and villages were connected to the national

grid at a lesser cost, it often generates political and social tensions between rival

towns. Towns who get connected under NEP feel more superior and this according

to stakeholders interviewed can fuel ethnic conflicts. Sustainability of both projects

remains questionable unless government and the donor community find a solution to

the deficit incurred by the utility companies.

2.6 Assessment of Donor Policy Influence and Practices on Institutional Impacts

Donor support for electricity expansion has been tremendous and this has

significantly improved institutional development particularly in the areas of capacity

building of staff of VRA and ECG. The project came with skilled contractors which

significantly affected the outcome of the project. It has also significant spillover

effects on other sectors of the economy that relies on electricity. The most worrying

aspects however, relates to the tying nature of most of these donor funded projects.

Stakeholders interviewed confirm the existence of tied aid in the two energy projects

examined. An earlier study by Aryeetey, Osei and Quartey (2003) revealed that

out of three electrification projects studied; only one underwent open competitive

tendering. In one of the surveyed projects, a single source Chinese company provided

the materials and services for the project which was found to be very expensive.

Stakeholders interviewed believed that some savings could have been made from the

project had procurement been tendered through open competitive bidding. The project

managers believed a savings of 25% could have been made had the project been

executed efficiently. Another limitation identified is that Chinese vehicles and funds

were not adequately provided for the supervision of the construction as required under

the agreement.

Another issue relates to the parallel nature of the National Electrification Project

28 29

(NEP) and the Self Help Electrification Project (SHEP). Whereas donors such as

JICA had financed the SHEP others financed NEP but under different conditions

which often generates political tension. Under SHEP, beneficiaries contributed 90%

of the utility poles while the government provided the remaining utility poles, the

transmission equipment and materials and the construction work in order to reduce

the financial burden on government, this did not happen under NEP. Beneficiaries

under NEP did not provide the poles. This has often led to the suspicion that

government uses these parallel programmes to reward party faithful. Besides, there

are no clear cut criteria for selecting which locality benefits from the electrification

programme since some towns and villages are yet to benefit.

A major limitation of donor influence relates to project sustainability. Towns and

villages were connected to the national grid but they are yet to pay for the true

cost of electricity. Whether this should be continually subsidized by government or

other ways are found to generate funds to cover the utility subsidies remains to be

addressed by government and donors. Should urban consumers be taxed to fund the

rural consumers or just like the road fund, a similar means is found to pay for the cost

of electricity and also increase the coverage.

28 29

3. PROJECT CASE B: ANWIANKWANTA YAMORANSA ROAD PROJECT

Prior to the start of the Anwiankwanta-Yamoransa (A-Y) road, an appraisal by

Overseas Economic Cooperation Fund (OECF, previous name for JBIC) in 1986

revealed that out of 28,290km trunk roads (14,130km) and feeder roads (14,160 km) ,

only 5782 km (ie 20.4%) had been paved and often in a deteriorating condition (JBIC,

2002). The Ministry of Highways (2003:11) reports that in 2003, the road network

is 50,000 km long of trunk, feeder and urban roads. The road condition mix was as

follows: 30% good, 21% fair and 49% poor. Of the national road network (39,483 km),

Ghana Highway Authority is managing 35% of the total network and 45% (6,289 km)

of the paved road network. At the time of the OECF appraisal of the A-Y road, the

Government of Ghana was implementing the second phase of the Economic Recovery

Programme (ERP-2), with a focus on agriculture, mining, road and other means of

transport and telecommunications (JBIC, 2002). Within the road sector, the focus was

to improve the coastal trunk network connecting the capital Accra and two hub cities

of Takoradi and Kumasi, of which the World Bank financed the Accra-Takoradi Road

and the Kumasi Road Projects.

3.1 Project Objectives

The A-Y road is an important because export commodities such as Cocoa, Gold

Ore, and Timber from the central Ashanti, and the Western Region are transported

to Takoradi Port for export (Figure 1). Thus, the construction of the A-Y road will

significantly help to achieve the objectives in ERP-2 through export promotion by

removing barriers to road transport. The A-Y road is located within the Central and

Ashanti regions of Ghana. Prior to the inception of project the A-Y road was in a very

bad condition; the old bitumen surfaced road is potholed with several depressions

in several sections. The 75km section from Anwiankwanta to Praso through Bekwai

passes through rolling to hilly terrain with a 3km scarp section near Farmena. The

average width of the carriageway is 5.7m with 1.4m shoulders. Also, the horizontal

and vertical alignment varies from fair to poor. The pavement has old deformed

bitumen surface. Although some badly failed sections were being resurfaced by the

Ghana Highway Authority, there were significantly damaged sections that required

attention. The road goes through several towns and villages and in a number of

the settlements there was very little right of way to allow for widening of the road

without demolition houses. Also, there were a number of bridges in the section which

are narrow and in poor structural condition. The remaining 97km road from Praso

to Yamoransa has poor horizontal and vertical alignment. In addition, it had narrow

pavements and many stretches had deformed posing danger to commuters. Besides,

30 31

the settlements along this section are too close to the road and therefore improvements

in the road will require by-passes.

Figure 1: Anwiankwanta-Yamoransa Road (Project Site)

Given the state of the road and its importance the Government of Ghana

approached the Japanese aid agencies for credit facility to reconstruct the road.

Thus, the main objective of the project is to improve road transport between the

two regions to facilitate trade. The Ministry of Road and Transport is responsible

for planning, construction and maintenance of trunk roads, feeder roads and urban

roads. Implementation is undertaken by three agencies, namely, the Ghana Highway

Authority; the Department of Feeder Roads; and the Department of Urban Roads.

3.2 Scope of the Project

The scope of work includes: (i) Rehabilitation of the A-Y road; (ii) Procurement of

road maintenance equipment; and (iii) Consulting services. The total project cost is

eleven billion, ninety one million Japanese Yen (¥11,091,000,000). The interest rate

was 3.0% per annum and the repayment period was 30 years with 10 years Grace

Period. The loan was partially untied and this explains why Japanese contractors

had to work on the project. The project agreement was signed on September 16, 1987

between the OECF of Japan and the Republic of Ghana. The road was constructed

from 1991-1994 with OECF financing as a single layer Asphalted Concrete pavement

road.

30 31

3.3 Impact of the Project

Effectiveness

The JBIC post evaluation report indicates that all civil works were completed on

schedule and with the exception of the additional replacement of two bridges in `Lot

1’. Also, in order to compensate for the increases in the cost of construction work, some

road maintenance equipment were not procured but this had no adverse effect on the

project outcome. Similar some modifications to the project scope were undertaken

including amendments to the design speed from 60km/h to 8-km/h to correspond

with speeds on other trunk roads in the country (JBIC, 2002). Consequently, the

construction part of the project delayed and was completed approximately two years

later than originally scheduled. This has been attributed to lengthy procurement

approval and review procedure within the Government. It was also reported that

heavy rainfalls (which should have been known at the appraisal stage) in the central

regions during the construction period delayed the civil works but more particularly

road earthworks. Consequently, the total cost increased by 1,300 million Yen due to

sharp increases in the local currency component in addition to increases in earthworks

and underground water problems at the site (JBIC, 2002). It is important to add that

the increment was funded by Government of Ghana.

Despite the shortcoming, the implementation of the project has resulted in the

rise in traffic volumes on the road which hitherto was virtually without much traffic

(Tables 10 & 11). Since the completion of the project, actual traffic volume has exceeded

the projected volume by more than a 100% (JBIC, 2002).

Table 10: Actual Traffic Volume (1987-1998)

1987 1994 1995 1996 1997 1998Planned 424 522 538 554 570 587Actual - 1012 1129 1374 1278 1409

Source: GHA & JBIC (2002)

Table 11: A-Y Road Traffic Volume by Vehicle Types in Selected Sites (1997 Survey)

Section (Km) Light (%) Medium (%) Heavy (%) AADTYamoransa – Tetsi Jct. (24) 52 26 22 1371Tetsi Jct. – Assin Manso (22) 43 48 9 1061Assin Manso - Assin Praso (53) 81 11 8 1606Assin Praso – Asokwa (40) 70 19 11 1242Asokwa – Anwiankwanta (36) 75 13 12 891

Source: GHA & JBIC (2002)

32 33

Prior to the execution of the project, big and heavy commercial vehicles had

considerable difficulty using the A-Y road because it was narrow and mostly unpaved.

However, the completion of the project has led to improved road access to both

passenger cars and commercial vehicles (JBIC, 2002). The increase in traffic volume

obviously implies high economic activity within the project area. In addition, satellite

markets have sprung up with the project area thus providing livelihood for the people.

Compared to other Japanese funded projects (the water sector project, Kumasi-Paga

Road project, the Telecommunication Rehabilitation Project etc), the A-Y road has not

achieved its long term objective. Some parts of the pavement surface started to show

signs of distress even before the construction works were completed. It is clear that

where the road condition is poor, market activities are unable to operate effectively.

An interview with opinion leaders in three communities who make regular use of

the road appreciated the importance of the road. They mentioned that the road had

reduced their traveling time and risk between Kumasi and their communities but

were quick to add that the road was not the best in the country in terms of quality.

The recent increase in road maintenance sometimes creates delays on the road.

According to JBIC (2002:5), an interview of 150 road users living within in proximity

to the A-Y road randomly selected re-affirmed the importance of the road (Table 12).

From Table 12, a significant proportion of sampled individuals (93%) agreed that the

road condition has largely improved or partly improved since the project came into

being. About 79% also indicated that they were `very satisfied’ or `satisfied’ with the

road improvement. This was attributed to `widened’ and `safer’ roads while those who

were not satisfied mentioned `lack of maintenance’ (52%). Many consider the positive

impact of the project as `faster trip to villages’ (45%) and the negative impact is

perceived to be the `increase in accidents’ (53%). It must be added that the survey also

mentioned that in some sections of the A-Y road, there has been sharp increases in

traffic accidents. Although there is no quantitative evidence, residents have indicated

the dangerous spots where accidents mostly occur and this has been attributed to

deteriorating road conditions, neglect of traffic safety regulations. It is not surprising

since traffic law enforcement, including speed limits and axle load control has not seen

much enforcement in the urban but more particularly in the rural areas.

32 33

Table 12: Interview Survey Major Results (n=150)

How much has the condition of the road improved? Largely improvedPartly improvedNot so much improvedNot improved

69%24%

6%1%

Are you satisfied with the level of road improvement? Very much satisfiedSatisfiedLess satisfiedDissatisfied

13%66%16%

4%

If you are very satisfied or satisfied, please explain the reason.

Road has widenedRoad has become saferRoad has been paredOthers

73%21%

3%3%

In case of less satisfied or dissatisfied, please explain the reason.

Roads are still nanowAccidents liave increasedThere is lack of maintenanceOthers2

18%9%

52%21%

What is the positive impact of the project? New shops and factoriesFaster trips to villagesNew housesOthers3

6%45%

6%43%

What is the negative impact of the project? Air pollutionHigher cost of livingIncreases in accidentsOthers4

1%1%

53%45%

Source: JBIC, 2002

Project Sustainability

According to the JBIC A-Y road post evaluation report, the GHA Maintenance

Department is mainly responsible for the Operation and Maintenance (O&M)

activities. However, routine decisions are taken at the regional office level. The report

added that about 90% of such routine periodic maintenance works sub-contracted to

local contractors as suggested by the World Bank. The rest (10%), which is usually

less of labour-intensive and requires more advanced technology are undertaken by the

Mobile Maintenance Unit (JBIC, 2002:7). Figure 2 aptly describes O&M processes with

the A-Y road.

34 35

Figure 2: O & M Processes in Ghana Highway Authority

Ghana HighwayAuthority

Deputy Chief Executive/Maintenance

Plant andEquipment

10 RegionalOfficesStore and Supplies

RoadMaintenance

Central MechanicalWorkshop

Greater Accra, Central, Western,

Brong-Ahafo, Upper West, Volta,

Eastern, Ashanti, Northern, Upper,

East

Mobile MaintenanceUnit I

Mobile MaintenanceUnit II

Bridge MaintenanceUnit

Source JBIC, 2002

The routine maintenance has often been financed by the Government of Ghana

through the Road Fund. In 1985, Ghana was among the first Sub-saharan African

country to establish a Road Fund for road maintenance. The operations of the fund

has since 1997 been restructured in order to ensure a public-private harmonization

in fund management and to strengthen its financial base. The main source of revenue

for the fund include fuel levies, tolls, vehicle license and inspection fees, international

transit fees and other extra-resources as approved by Parliament (Table 13).

Table 13: Road Fund Revenues by Source (Billions of Cedis)

1996 1997 1998 1999Fuel Levy 59.35 98.65 180.60 193.49Bridge Tolls 0.85 1.60 2.36 2.74Road Tolls 0.74 1.83 2.77 3.35Ferry Tolls 0.07 0.06 0.02 0.06Vehicle Registration Fees 1.85 2.10 7.81 11.89Road User Fees 0.00 0.00 0.00 8.05International Transit Fee 0.00 0.00 0.18 0.53Grand Total 62.86 104.24 193.74 220.11

Source: GHA and JBIC, 2002

Since the inception of the A-Y road, the northern sections in particular have

34 35

recorded significant deterioration due to overloaded trucks and non-functional

drainage structure. Despite occasional repairs, such as resurfacing and replacement

of surface asphalt by local contractors and GHA Mobile Moving Unit (MMU), the road

has not yielded the expected results (JBIC, 2002).

DAC evaluation criteria define sustainability as the continuation of benefits from a

development intervention after major development assistance has been completed. It

also refers to the probability of continued long term benefits as well as the resilience to

risk of the net benefit flows over time. In recent times, the Japanese Aid agencies have

established a Counter-Value Fund to support project sustainability of which the A-Y

road is benefiting. As part of the grant process, Japan provides value funds whereby

the recipient government keeps a portion of a loan for a particular project to maintain

the project upon completion. There is also a scheme whereby the Japanese give funds

to the government to undertake crop cultivation and the revenue generated from the

sale of the farm produce is deposited at the Bank of Ghana. As and when needed, the

government applies for it to use to ensure sustainability of other projects. Interviews

with stakeholders such as the GHA and other key beneficiaries have attested to the

fact that Japanese aid strives to ensure sustainability. According to the respondents,

they `establish a maintenance culture where they support the district that will

undertake the road maintenance work with the appropriate equipments’.

Stakeholders at the Ministry of Finance also affirmed the assertion that the

Japanese support projects fully. Food aid and income from other forms of aid are

paid into Bank of Ghana designated accounts collectively called the `Counter Value

Fund’. There is also the non-project grant or aid which is given as some kind of loan

to citizens. When these loans are paid they are also paid into the Counter Value

Accounts. Between 2003 and 2005, $2.8 million of CVF has been used to promote

microfinance for women entrepreneurs, $4.25 million for education and $30,000

for Irrigated agriculture. These funds are for micro-financing, agriculture and

rural infrastructure. In the past, Ghana was allowed to use ¢140 billion for road

construction, ¢7.45 billion to enable COCOBOD to purchase cocoa chemical analyzing

equipment to analyze the chemical content of cocoa particularly those to be exported

to Japan. Currently, a total of ¢35 billion is expected for the school feeding program. It

must be added that Japan’s concentration is in the three northern regions.

The A-Y road is currently being reconstructed by the Japanese government in

collaboration with the Government of Ghana. The ever increasing traffic volume,

especially heavy cargo trucks, but more specifically illegally overloaded cargo trucks

estimated to be 2.3 times of the forecast standard axle, have led to deterioration of the

pavement structure and this has consequently affected the efficient use of the road.

36 37

Policy Reforms

The A-Yroad project cannot be said to be one of the successful infrastructure

projects financed by JBIC because it has started to deteriorate quickly. This is

attributed to (i) Bad soil condition and (ii) Overloaded trucks carrying timber logs

etc. The implementation of this and other infrastructure projects has led to major

policy reforms. First, third party evaluation of roads or other infrastructure projects

is now encouraged by JBIC and the results are published. Secondly, the evaluation

has provided JBIC with information on the condition of the road and also the benefits

enjoyed by the community. It has also led to policies to effectively check the soil

condition of roads as well as overloading.

A third policy reform is that the standards for constructing roads have changed;

previously, the roads had 5cm thickness but now 10cm thickness level is

recommended. Thus solid roads with high standards are being constructed although

they are very expensive. A related issue is that since the project was not satisfactorily

executed, and even signs of failure were observed at the time of handing over, policy

statements were issued on standards of road projects in Ghana. Generally, the project

failed prematurely. Thus, the experience derived from the A-Y road among others

might have informed the blanket instruction given in the 1990s by Col. Mensah (a

former Minister of State) that all asphalt roads in Ghana must be laid with granite

sand, which has no plastic materials. Another major observation in terms of policy

reforms relates to monitoring of projects. At the time of the project implementation,

confidence in foreign contractors and engineers was very high, thus monitoring was

not done on any rigorous basis. However, the outcome of the road project among others

has changed that perception and currently monitoring is done on a very rigorous basis,

just as it is done for jobs undertaken by local firms.

Technology Transfer

Under the A-Y road project, although the contract was won by a Japanese company,

it only worked with 10-15 expatriate staff and with over 1,000 Ghanaian construction

workers. The company came with Japanese equipment and this led to significant

transfer of knowledge to local staff. The project could be said to have contributed to

knowledge transfer in the sector through two facilities promoted by the contractors.

First, as part of the project implementation, some experts of the Ministry and the

GHA were selected and sponsored to take a short course in Construction Management.

The interviewee was a beneficiary and could attest to how the course has helped

in enhancing his professional capacity and that of the ministry and the agency.

Secondly, the consultants on the project also assisted the GHA to prepare a project

supervision manual, titled: Site Operation Manual . Until then, no specific format

or guideline existed for the supervision and preparation of report on projects under

36 37

implementation. The manual has since been used in the sub-sector and presently

forms the basis for all reports presented to the Ministry and its Agencies.

However, personnel at the higher level of management believe the project did not

lead to any significant knowledge transfer. They argued that as far back as 1987, the

GHA was able to provide Engineering Services and also managed major projects such

as the Kaneshie-Ordokor-Mallam road and the Obetsebi Lamptey circle – Korle Bu

road. One of the interviewees served as the acting-Resident Engineer for most part

of the duration of the first project, and then Resident Engineer for the latter project.

Thus, GHA had the capacity and the staff strength to manage and execute major

projects at the time of implementation of the A-Y project. According to personnel of

GHA, they usually send their employees on `secondment’ to work on such projects

and the technology used was essentially the same. Thus, no particular knowledge or

technology transfer could be cited. For young Engineers who had the chance to visit

the site, the only thing is the site experience, which comes with any project.

Capacity Development

The viewpoint that most local contractors do not have capacity was also emphasized

under the road project. At the time the A-Y road was being constructed, local

contractors simply did not have the capacity to execute such project and this has not

changed over the years. The managerial capacity of local firms was extremely low,

and they also exercise very low commitment to ensuring quality. In terms of capacity

to form partnership with foreign contractors, the defunct Kasadjan construction firm

could be cited as an example of such potential. The firm was largely a Lebanese-

Ghanaian partnership though at the onset it was influenced extensively by its

Lebanese partner. At the peak of its operations, the firm was managed entirely by

Ghanaians and could construct an asphalt road (Kumasi and Sunyani for instance) in

as far back as 1988.

Institutional Changes

GHA had the capacity at the time of implementing the road project to play the role

of the expatriate Engineers but they worked on jobs fully financed by the Government

of Ghana (GoG). No major institutional change has occurred in the past; nevertheless,

in the past, when most projects were financed by GoG, GHA used to be involved

extensively in the entire cycle of projects, but had to scale down because most projects

were financed from external sources. Recent increase in GoG financed projects has

led to a return to the old order. In terms of institutional changes, various units of

GHA are charged with the management of various stages of project cycle. This has

helped to strengthen the present institutional setup of GHA. Even at present, when

suggestions have been made for some reforms, GHA still undertakes its operational

38 39

responsibilities including raising resources to finance its investment needs.

3.4 Comparison with Reference Project (Accra-Yamoransa Road)

The A-Y road was specifically selected as a reference project because it links

the Yamonsa-Cape Coast road and has been one of the excellent road networks

reconstructed in Ghana in the 1990s by the Construction Pioneers (CP). The proposed

reconstruction includes expanding a short 16.4 km section to dual carriageway,

widening other sections to a uniform standard, which would provide design speeds

for 100km/hr on all but one 16 km section through hilly terrain, where an 80km/hr

design is acceptable. Climbing lanes are also provided to increase capacity on steep

grades (4-5%), where the speed of a loaded truck is expected to be reduced by more

than 16 km/hr below average travel speeds and where total traffic and the percentage

of trucks warrant their use. Table 14 indicates characteristics of each section of the

Accra-Yamoransa Road. Roadway capacity analysis has been carried out using the

Highway Capacity Manual, Special Report 209, TRB, 1985. As a result, a four lane

cross section was proposed for the 16 km link closest to Accra and two lanes for the

remaining sections. The economic assessment employed the RODEMAN program,

which is a slightly simplified version of the World Bank HDM-III model. The ERRs for

each of the six sections are presented in Table 14.

Table 14: Characteristics of the Accra-Yamoransa Road

AADT Est. 1993

AADT 2011

Lanes Proposed

Length (km) Terrain ERR

(%)Accra-Mallam 5500 21500 2X2 16.4 Flat/R 30Oduponkpehe 5000 16300 2Oduponkpehe-Awutu 3200 8500 2 10.2 Hilly 30Awutu-Winneba Jct. 2900 7700 2 20.9 Hilly 32Winneba Jct. Apam Jct. 2550 6800 2 14.2 Flat 22Apam Jct. – Mankesim 2150 5700 2 30.7 Rolfing 8Mankesim - Yamoransa 2750 7300 2 23.9 Various 33TOTAL 116.3 25

Source: World Bank (1999), Highway Sector Investment Project Staff Appraisal Report

The A-Y road compares very well with the Accra Yamoransa road; both deteriorated

quickly with the latter deteriorating faster than the former. Inadequate funds to

undertake maintenance coupled with overloading significantly affected the project

outcome. Whereas the A-Y road was funded by a bilateral donor, the latter was

financed by a multilateral. Whereas the JBIC project did not undergo open competitive

bidding, the Accra-Yamoransa project did. Despite these similarities and differences,

38 39

both projects deteriorated quickly and it is not evident what role the type of donor

played

3.5 Assessment of Donor Policy Influence and Practices on Institutional Impacts

In terms of aid for infrastructure development, only a few donors are directly

involved as depicted in Figure 3 below and this has been the trend since the 1980s.

The road project which was mainly donor financed was demand driven and therefore

country ownership was highly considered. The project appraisal report mentions that

the Government of Ghana approached the Japanese government for assistance to

support the project. The road project coincided with the period when the Japanese

had little influence on aid allocation except for technical matters. During the period,

Japanese were noted for being less `intrusive’ in policies or programmes of national

governments. Aryeetey and Cox (1995) observe that the transformation of Japan into

the single largest source of bilateral assistance went for a long time unnoticed by many

Ghanaians. Many have argued that this development had taken place without much

notice mainly due to the usually `low profile’ nature of Japanese officials in Ghana.

The `low profile’ signifies the non-involvement of Japanese aid officials in what they

perceived to be `domestic affairs’. Japanese aid officials were seen to be unlikely to

discuss with government and civil society in Ghana, aid issues of a non-technical nature

although this attitude has been changing over time.

Indeed, in the 1990s Japanese aid officials begun to show interest in the

management of aid resources beyond technical issues, a development that surprised

a number of Ghanaian officials. During the policy dialogue between the Ghana

Government and the Japanese Government in March 1995, the Japanese side

emphasized the need for `transparency and accountability’ in ODA use as a major

principle for convincing Japanese taxpayers about the necessity of ODA and stressed

the importance of `good governance’ as a conditionality (Aryeetey and Cox, 1995).

This marked a major departure from previous discussions where `the Japanese never

insisted on non-technical conditions’6. The dialogue signaled new Japanese interest

in issues beyond economic and technical cooperation. The new development brought

Japanese aid conditions closer to those of other bilateral donors. It is therefore not

surprising that Japanese aid has moved beyond technical cooperation and even

into budget support currently; highlighting the interest in non-technical nature of

Japanese aid.

6 This refers to issues involving the use of technical cooperation in Japanese ODA which used to be the focus of Japanese aid until interest in issues of governance, etc took the centre stage in Japanese aid modalities.

40 41

Figure 3: Donor Support for Infrastructure Development (2003-2005)

Source: Development Partners (DPs) Envelope June 2006

Table 15: Tied and Untied Aid (Bilateral) to Electricity & Roads Sub-sectors in Ghana

Source: Ministry of Finance, Ghana

A major donor factor which affected the outcome of the project is the issue of tied

aid. A micro-economic study of tied aid by Aryeetey, Osei and Quartey (2005) on the

energy and road sub-sectors of the economy revealed that while stakeholders including

project managers felt project funds have been of tremendous assistance to Ghana,

they also argued that they would have had greater impact on the community and help

reduce poverty if there had been no delay in securing counterpart funds, and if the

high cost of materials and services of consultants had been contained. On average, it

is estimated that the sampled projects would have saved 18% of the cost had the funds

not been tied to conditions and if procurements had been subject to open competitive

bidding (Table 15 & also see appendix).

40 41

Project staff observed that only foreign contractors worked on the road projects.

While this ensured that quality roads were constructed, the practice did not promote

local capacity-building. It is argued that it would have been more appropriate if foreign

contractors teamed up with local firms to strengthen existing local capacity. Secondly,

road maintenance funds were woefully inadequate which has affected the general

sustainability of road projects in Ghana. Government has not been able to match the

growing donor support for road infrastructure with an equally significant amount of

resources for road maintenance. Consequently, more new roads are being funded by

donors and the government while old ones are left to deteriorate. This phenomenon is

not new, according to the World Bank’s HSIC staff appraisal report (1999), `there has

been increasing concern that insufficient funds are being allocated for maintenance

while new reconstruction works continue to be funded’. The charging of road tolls to

cover part of the maintenance has not been widely accepted. It has been argued that

before road tolls are charged, there should be alternative routes so that those who

are not willing to pay the toll can use. Unfortunately, there is hardly any alternative

route connecting major cities and towns in Ghana except a major road. This obviously

explains why road tolls form less than 5% of total revenue from roads. Unfortunately,

the 1996-2000 Road Sector Expenditure Programme which was jointly developed by

the government, user groups, Parliament sub-committee for infrastructure and all

donors active in the sector (OECF, KfW, EU, the Dutch Government, BADEA, OPEC,

DANIDA, USAID and ADF) is yet to turn the situation round.

42 43

4. CONCLUSIONS AND POLICY IMPLICATIONS

The paper investigates aid effectiveness in infrastructure, particularly, its impact on

policy reforms, transfer of knowledge and organizational capacity to plan, implement

and operate, and human resources development in general. Two infrastructure

projects in Ghana, an energy project and a road project were selected based on set

criteria outlined above. Secondary data such as project contracts, project completion

reports and other secondary data sources were used to complement primary

information. The primary data was obtained from interviews with donors and relevant

stakeholders.

A major finding from the study is that the project, particularly, the road sector

project which has been referred to as a `failed project’ has led to significant policy

reforms. New road standards has been adopted and the use of external or third party

monitoring and evaluation is now been used by JBIC in all of its projects in Ghana.

The energy project also highlighted a policy failure as a result of parallel sources

of funding and guidelines for energy projects in Ghana. Whereas beneficiaries of

donor financed energy projects do not pay connection fee, their counterpart in nearby

communities who connect under SHEP are required to pay a fee. Thus, it is believed

that infrastructure projects are used to reward the `political faithful’. Another

interesting observation from the stakeholder interviews is that more technology

transfer occurred at the lower level of personnel than at the management level. Most

management personnel have been trained locally or overseas to meet the standards

of the foreign consultants. A related issue is that a greater proportion of lower level

personnel are hired locally and they have benefited considerably from the new

technology and better ways of doing things. It was also evident that most major donor

funded infrastructure projects are executed by foreign companies sometimes tied to

the loan facility. Even in cases where local contractors could bid for such projects,

it is believed they did not have the capacity to do so single handedly or to form

partnerships with foreign companies. However, when the local contractors are sub-

contracted and supervised by the foreign ones, they are able to deliver.

Despite the benefits or impacts outlined above, major challenges remain. For

infrastructure projects to be successful, certain conditions must exist for the

institutional effects to be significant. First, the project must be country owned, there

should be enough funds to ensure maintenance, must be economically viable in some

cases, donor influence has to be minimal and quality has to be key. In addition,

regulations on usage must be enforced to the maximum. Unfortunately, in the projects

discussed above, many of these were lacking. Lack of third party monitoring and

42 43

evaluation has affected the impact of infrastructure projects in Ghana. Secondly,

land conflicts and chieftaincy disputes affected the completion of the energy projects

in some selected communities. The road project failed because of poor soil quality,

overloading and the absence of third party evaluation of the project.

The policy lessons to be drawn from this are: first, there should be a properly

enforced regulation on the use of infrastructure in the country. Weighing stations

should be set up at the entrance and exit of major roads and the maximum loading

capacity should be strictly enforced. Secondly, the connection fee to electrification

projects should be uniform to minimize the political patronage problem. Also important

is the need to minimize land conflicts and chieftaincy disputes in the country through

effective implementation of the Land Administration Project. Finally, support should

be provided to upgrade the skills and competencies of local contractors to a point

where they can jointly bid with foreign companies for infrastructure projects. This

should be complemented with policies to consciously promote partnership between

local and foreign contractors.

44 45

REFERENCES

Arakawa H and Wakabayashi J (2006), Budget Support and Aid Effectiveness: Experience in East Asia, JBIC Review, No. 14

Aryeetey, E., and A. Cox (1997), ‘Aid Effectiveness in Ghana’, in J. Carlson et al. (eds), Foreign Aid in Africa: Learning from Country Experiences. Motala Grafiska, Sweden.

E. Aryeetey, J. Harrigan and M. Nissanke (2000), Economic Reforms in Ghana: The Miracle and the Mirage. London: James Currey Ltd.

Aryeetey, E., O. Baffour, and P. Quartey (2003), ‘Does Tying Aid make it More Costly? A Ghanaian Case Study’, Paper presented at the workshop on ‘Quantifying the Impact of Rich Countries’ Policies on Poor Countries’, 23-24 October. Washington, DC: Center for Global Development and the Global Development Network.

Nissanke and Aryeetey (2003), Comparative Development Experiences of Sub-Saharan Africa and East Asia: An Institutional Approach, Chapters 1&2, Ashgate, UK

Institute of Statistical Social and Economic Research (2005), State of Ghanaian Economy Report, ISSER, University of Ghana

Japan Bank for International Cooperation (2002), Ex-post Evaluation Report of Anwiankwanta-Yamoransa Road Rehabilitation Project

Japan International Cooperation Agency (2007), The Project for Electrification of Lower Volta Area, Ex-post Evaluation Report.http://www.jica.go.jp/english/evaluation/reports/ex-post/14-14-53.html. (Assessed December 2007)

Jerome A and Ariyo A (2004) Infrastructure Reform and Poverty Reduction, a paper presented at the TIPS / DPRU Forum, 2004

Keener S.K and Banerjee G (2005), Ghana: Poverty and Social Impact Analysis of Electricity Tariffs, ESMAP Technical Paper 088, World Bank, Washington DC

Ministry of Roads and Transport (2003), Road Sector development Review Report 2003

OECD (2006), 2006 Survey on Monitoring the Paris Declaration, Ghana Chapter, OECD, Paris.

Osei, R., and P. Quartey (2001), ‘The HIPC Initiative and Poverty Reduction in Ghana: An Assessment’, WIDER Working Paper No. 2001/119, Helsinki: UNU-WIDER.

Public Utilities Regulatory Commission Data, 2002

Quartey, P. (1997). The Macroeconomic Impact of Aid on Economic Growth: A Comparative Analysis of Ghana and Malaysia’. Warwick: University of Warwick MA Dissertation.

44 45

Quartey, P. (2005). ‘Innovative Ways of Making Aid Effective: Tied Aid versus Direct Budgetary Support’, Journal of International Development, Vol. 17, pp 1077-1092

Volta River Authority (2000), National Electrification Project, Implementation Completion Report, Accra, Ghana

World Bank (1999), Highway Sector Investment Program, Staff Appraisal Report

World Bank (2001), National Electrification Project Implementation Completion Report, World Bank Energy Unit, Africa Region

World Bank (2003), World Development Indicators, World Bank, Washington DC

World Bank (2005), World Development Indicators, World Bank, Washington DC

46 47

APPENDICES

Appendix 1

Table A1: Aid Flow to Ghana by Major Donors (2003-20067)

Source: World Bank, 2006

7 2006 figures are up June only

46 47

Table A2: Total Disbursements by Economic Activity (2003-2006)

Source: Extracted from DPs Envelope, June 2006

48 49

Appendix 2: Interview Guide

QUESTION GUIDE

GOAL: The focus of the research is to ascertain the “processes of institutional

changes associated with the two infrastructure projects and the relationships

between those institutional changes to the overall impact of the infrastructure

projects”. The study will examine impacts “related to ideas influencing policy,

transfer of knowledge and lessons learned, organizational capacity to plan,

implement and operate, and human resources development in general.”

1. Ideas Influencing Policy

How was this infrastructure project designed? And how did the community’s need for

the project reach the government? Were members of your community consulted in

designing this project? Who were the contractors of this project? Were they local or

foreign? Were the contractors selected on a competitive basis or they were part of the

programme conditionalities? How useful is this project to the community? What policy

lessons can we draw from this project? Do you think the outcome of this project has

influenced policy in anyway?

2. Transfer of Knowledge

How many people were directly employed on this project? Were there local employees?

What proportion were local employees? Were they middle and low level personnel or

some were part of management? Did the project sub-contract some of its components

to local contractors? If yes, were they executed satisfactorily? Were the local employees

on this project familiar with the technology used by the contractor? Or a new

technology was used. Did the project promote technology transfer in Ghana within the

sub-sector?

3. Organizational Capacity (plan, implement and operate, and human resources

development in general).

Does the District Assembly in the community where the project was implemented

have the capacity to plan a demand-driven infrastructure project? During the project

phase, did your organization have the capacity to (i) Plan (ii) Implement (iii) Operate

the project? Was your organization adequately staffed? Did the project lead to human

resource development in your organization? If yes, in what way?

Were local contractors or personnel involved in the project implementation?

Do you think local contractors have the capacity to form partnerships with foreign

contractors or they should be sub-contracted by the main executors of the project?

Do you think infrastructure projects in your area led to human resource development

48 49

in general?

4. Institutional Processes (use a specific project)

Please describe the institutional changes that have occurred in this organization over

the past ten yearsIn what way has these changes affected

- project identification

- project preparation

- Appraisal

- Approval

- Implementation

- Evaluation

Are there any specific factors explaining success or failure?

What was the role of the JBIC office, the World Bank office in the design and

implementation of the project? Did these institutions affect (positive or negative) the

outcome the project? Was there any political factor or influence which affected the

outcome of the project?

What other institutional challenges do you think may have affected the outcome of the

project (be specific). Example, lateness, dedication of some key staff etc

50 51

Appendix 3: Institutions & Persons Contacted and/or Interviewed

NAME INSTITUTION ADDRESSMr. Samuel Adjidjonu Deputy Manager (Rural Projects),

Electricity Company of Ghana0208135611Sadjidjonu@yahoo.com

Mr. Kenji Murata Assistant Resident Representative and Acting Head (Transport) – Japan International Cooperation Agency

murata.kenji@jica.go.jp, 0243702407, 021760781/2

Shinichi Tamamitsu Embassy of Japan, Accra Shinichi.tamamitsu@mofa.go.jp Mr. Michael Abbey Director of Contracts, Ghana

Highways Authority.maabbey@highways.mrt.gov.gh, 0244709643, 021666591/4

Mr. E.K. Twumasi Deputy Director, Monitoring and evaluation. Ministry of Transportation

ektwum@hotmail.com, 0249251483

Mr. Emmanuel D. Osafo Principal Electrical Engineer, Volta River Authority

eosafo@akuse.vra.com, 025120620

Mr. Richmond Evans Appiah

Director of Engineering Services. Volta River Authority

depd@vra.com021668910

Mr. Samuel Abu-Bonsrah Head of Japan, Ghana and South Korea Desk. Ministry of Finance and Economic Planning

sabubonsrah@yahoo.co.uk02082352700246805465

Mr. Boakye-Appiah Divisional Manager (Urban Projects). Electricity Company of Ghana.

0208118709

Mr. B.K. Dapatem Former Divisional Manager (Urban Projects). Electricity Company of Ghana.

0244323253

Edumfa, AgyiriKrom, Abaka, Yamoransa

Assemblyman and Community Leaders

50 51

Project Specific Cost of Tied Aid in Ghana

52

Japan’s Assistance to Ghana

Disbursements by Japanese Fiscal Year (April-March) and by Type (100 million Japanese Yen)

Fiscal Year

Loan Aid Grant AidTechnical

Cooperation

2000 Project for Eradication of Poliomyelitis (1.09)•Project for Improving Primary Health Care (6.51)•Project for Rural Water Supply (5.11)•Non-project Grant Aid (20.00)•Grant Aid for Increase of Food Production (4.00)•Food Aid (2.80)•Grassroots Projects (18 projects) (0.69)•

(Total 23.98)(Total 40.20)

2001 Project for Construction of Small and Medium Scale Bridges (2.62)•Project for Eradication of Poliomyelitis (through UNICEF) (1.02)•Food Aid (3.00)•Grassroots Project Grants (27 projects) (0.78)•

(Total 21.95)(Total 7.42)

2002 The Project for Construction of Small and Medium Scale Bridges (6.03)• Infectious Diseases Prevention for Childlen (through UNICEF) (1.00)•The Project for Rural Electrification (7.55)•The Project for Rehabilitation of Trunk Road (1.16)• Supply of Sound and Lighting Equipments to the National Theater •(0.45) The Construction of School Building at Kajero (0.04)• Supply of Second-Hand Ambulance to Okomfo Anokei Teaching •Hospital (0.02)Grassroots Project Grants (13 projects) (0.51)•

(Total 17.79)(Total 16.76)

2003 The Project for Rehabilitation of Trunk Road (9.98)• Infectious Diseases Prevention for Children (through UNICEF) (1.16)• The Project for Construction of Small and Medium Scale Bridges (1.36)•The Project for Rural Electrification (3.06)• Non-Project Grant Aid (5.00)• Supply of Sports Equipment to National Sports Stadium (0.04)• Grassroots/Human Security Project Grants (19 projects) (1.20)•

(Total 15.55)(Total 22.19)

2004 Debt Relief •(1,046.78)

The Project for Rehabilitation of Trunk Road (17.78)•The Project for Rehabilitation of Trunk Road (1.13)• Infectious Diseases Prevention for Children (through UNICEF) (1.18)•Sector Programme Grant Aid (5.00)•Grassroots Cultural Grant (1 project) (0.01)•Grassroots/Human Security Project Grants (2 projects) (0.17)•

(Total 18.74)(Total 25.27)

2005 The Project for Rehabilitation of Trunk Road (21.89)•Non-Project Grant Aid (5.00)• Infectious Disease Prevention for Children (through UNICEF) (3.00)• Grant for Increase in Food Production with Special Emphasis on •Under Privileaed Farmers (3.60) Grassroots Cultural Grant (0.46)•Grassroots/Human Security Projects Grants (6 projects) (0.38)•

(Total 19.44)(Total 34.33)

2006 The Project for Rehabilitaion of Trunk Road (14.61)•The Project for Rural Electrification (6.78)• Improvement of Fundamental Medical Equipment in Upper West •Region (1.63) Infectious Diseases Prevention for Children (through UNICEF) (2.98)•Sector Programme Grant Aid (14.00)•Grassroots/Human Security Project Grants (6 projects) (0.26)•

(Total 2.74)(Total 40.26)

2007 DebtRelief

The Project for Rural Electrification (4.10)•Infectious Diseases Prevention for Children (through UNICEF) (1.22)•

up to October 2007(Total 5.32)

Source: http://www.mofa.go.jp/policy/oda/data/05ap_af02.html#GHANA

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Aid Effectiveness to Infrastructure:A Comparative Study of East Asia and

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