Ghana

DUMSOR: A STUDY IN FAILED LEADERSHIP UNDER CRISIS

Rolling power cuts in Ghana, referred to tongue-in-cheek by Ghanaians as DUMSOR, a term which has found its way into the world of international lexicons with an entry in Wikipedia (https://en.wikipedia.org/wiki/Dumsor), is currently in its fifth year.

For years, and still continuing, industries have faced uncertainty over what was supposed to be a temporary load-management schedule put in place by the local power production, grid management, and distribution triumvirate of VRA, GRIDCO, and ECG, further preventing them from planning adequately for production.

The crisis remains unresolved to date, and the reasons are not difficult to fathom, and understand. President John Dramani Mahama failed the utmost test of a leader: providing clear, focused, and decisive leadership under crisis.

Impact

Dumsor has exacted a devastating toll on ordinary Ghanaians, small businesses and manufacturing industries. Many have had to close shop, reduce production, and/or lay off staff due to the Government’s failure to effectively deal with the damaging power cuts.

Industries, already struggling under a raft of onerous taxes, have had to dip deep into dwindling operating capital to make unplanned-for expenditures on fuel and maintenance for back-up generators, increasing already ballooning production costs.

The result of this has been massive layoffs of workers at all levels. By conservative estimates, by the end of the first quarter of this year alone, over 12,600 workers have lost their jobs due to the extremely difficult business and economic conditions under which businesses are operating. This excludes the many undocumented job losses at the micro-enterprise levels: dressmakers, welders, bakers, corn-mill operators, electrical fittings dealers, and all manner of small businesses that rely on power for their operations.

Institute of Statistical, Social, and Economic Research (ISSER) estimates that Dumsor costs the economy about GH¢4 Billion annually (about US$940 Million, just US$10 short of the entire IMF loan under the Programme signed this year).

The granular detail of our GDP statistics tell the story more starkly: the growth rate of the manufacturing subsector of the industry component of Real GDP dropped from a height of 17% in 2011 to 2% in 2012!!! This was followed by minus 0.5% in 2013 and minus 0.8% in 2014.

This is devastating under any circumstance, and more so for an already fragile economy such as Ghana’s.

Fiddling

To date we have run through the full gamut of excuses, and explanations as to what, when, and how of the Dumsor, but short on effective solutions. From ruptured gas pipelines through to too many Ghanaians charging their mobile phones to lack of capacity, Ghanaians have heard varied explanations, from the weird to the asinine, but no relief seems to be in immediate sight for them, their businesses, and industries.

This standstill, of solaran Battle of Gibeon proportions, we argue, is the result of the following:

(a). Intentional misdiagnoses of the current crisis as means for the President to obviate responsibility

(b). Lack of candour by the President

(b). Complete ineffectiveness in providing a solution for five (5) long years and counting due to the lack of leadership skills by the President under crisis

What the President Knew

In August 2011, a Joint Technical Team (JTT) of the Government of Ghana (GoG), and the United States Government (USG), completed a joint study, and prepared a comprehensive report to evaluate the key constraints to Ghana’s economic growth. The ‘Constaints Analysis’ (Growth Diagnostics) approach, according to the report, was to identify and prioritize “what needs to be done now” so a country can “concentrate efforts on alleviating those”, rather than focusing on broad policy reforms (like that of IMF) since governments tend to have limited administrative & political capacity to follow through with them.

Further, the study report identified two classes of constraints: ‘ordinary’ constraints and binding constraints, the latter being the most severe and requiring urgent action.

Of the major “binding constraints” identified by the JTT, “power is a binding constraint to firm growth in Ghana. The evidence shows that the supply of power has not kept pace with the demand. This is evident from the declining electricity production per capita. Meanwhile, high transmission and distribution losses cause the effective supply to economic agents to fall significantly short of the production capacity that exists. Just as important, the available power supply is highly unreliable, with frequent and prolonged outages disrupting production, damaging equipment, and forcing firms to rely on generators to provide standby power. We argue that insufficient and unreliable power is causing losses of at least 5.6 percent of GDP, [which, in 2011, was about GH¢3.3 Billion, validating ISSER’s GH¢4 Billion four years on]. In addition, firms point to power as being the most important constraint to their growth. This study therefore argues that unmet demand for reliable power is a binding constraint to growth in Ghana”.

More importantly, the report concluded, and confirms what many analysts have said all along, that “THE MAJOR CHALLENGE TO GROWTH POSED BY GHANA’S POWER SECTOR IS NOT PRIMARILY A MATTER OF LIMITED GENERATING CAPACITY, BUT RATHER ONE OF POOR RELIABILITY”. (Emphasis mine). Despite the denials by the Government, latter events were to prove that the unreliable supply of power was largely due to financial, not capacity constraints.

Clearly, the President have had personal knowledge, from day one, of the path to take in dealing with Dumsor. The question is why we are still chasing the wrong ‘solutions’, why Dumsor remains unsolved to date, and why the President has not taken personal responsibility for his failure to lead.

Taking Responsibility

President John Dramani Mahama has failed to deal with what was determined to be a critical, binding constraint that required immediate action since 2011.

More than a year after the JTT’s report, and leading into the 2012 elections, President Mahama insisted that Dumsor was a combination of an “act of God” which would end by Mid-November of that year, and a capacity issue, promising that with the addition of an additional 820 megawatts of power the supply side challenge will be resolved, and more importantly, that by the end of his first term in office, “Dumsor will be a thing of the past”.

Again, clearly, the President, despite the clear, unambiguous diagnoses by the JTT, opted for the ‘solution’ that was discounted.

President Mahama had since had enough opportunities to redeem his dimmed leadership position but failed to take advantage of them.

At the Distinguished Speaker Lecture Series Lecture in March 2015, Dr. Mahamudu Bawumia, an economist and Visiting Professor of Economic Governance at Central University College, who is also the Vice Presidential Candidate of the New Patriotic Party (NPP), demonstrated the lack of candour on the Government’s position that the power issues are a result of lack of generating capacity, concluding, with relevant financial detail, that “ultimately, the Dumsor problem is more of a financial problem than a technical one”.

In what seems to be a riposte, President Mahama later still insisted (May 2015) that Dumsor is not the result of financial constraints.

In sum, four years later after the JTT provided a clear solution path, the Government of Ghana is still struggling to keep the power on, and its President is stubbornly insisting that Dumsor is a technical, not a financial issue. This borders on recklessness at worst, and a failure to demonstrate leadership when it matters most, at best.

A leader must take responsibility for, and provide personal leadership in expeditiously resolving issues o grave national, existential importance such as Dumsor is. He failed, and has not, to date.

Elements of Failure

In conclusion, it is our view that the unresolved Dumsor, and its economic, social, and some say psychological impact on Ghanaians, their businesses, and industries, is the result of the failure by President John Mahama to provide leadership under crisis, a trait, we argue, which is characteristic of the NDC Government itself, as evidenced across various sectors of the Ghanaian economy which is now under an IMF austerity programme.

So what are the salient elements of President John Mahama failure? Here are examples:

He had sufficient, credible, advance diagnosis, and a path to solution to Dumsor. The JTT of the GoG and USG were clear as to the cause, the optimal solution, the risks of Dumsor to the economy, as well as the urgency with which it must be attended. The President did not only fail to follow the advice but chose to follow the path of “capacity” which was clearly discounted. The consequences of that failure of his leadership is that we are still suffering rolling power cuts, and its consequences.

He knew that Dumsor was a “binding constraint”, which required immediate action. He also knew that that was the option to faster growth, which may have made it possible for Ghana to avoid signing up to an IMF austerity programme, requiring broader, constraining, stringent, and dragged-out policy reforms. The President failed to follow the advice, nor heed the warning, and now Ghana is signed on to the IMF austerity programme.

He has consistently showed a lack of candour by continuing to insist that Dumsor is a capacity, not a financial problem. This has prevented him from focusing on providing leadership for an appropriate solution.

President John Dramani Mahama indeed has failed the utmost test of a leader: providing clear, focused, and decisive leadership under crisis.

 

Author: Evron Hughes || Chief Strategist, Cambridge Capital Advisors Limited

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