Business Analyst - July 5

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Tuesday, July 5, 2022Excess gas capacity vs adequatefeedstock for industrialization• Continued from Page 7consumed just 255 MMSCFd in2019. But this is expected togrow to 448 MMSCFd by 2023and with the newindustrialization policies andadditional projects fromAmandi, Early Power, andCenpower, demand can beexpected to grow even faster.And here lies the justificationfor rapid expansion of gassupply.“Gas is cheaper and cleanerthan solid fossil fuel and so itrepresents the best way forwardfor Ghana” asserts dr Asante.“With Ghana’s industrializationgrowing rapidly, throughinitiatives such as one districtone factory, and marketopportunities for Ghana’smanufactured goods expandingrapidly too, through the AfricanContinental Free Trade Area, theuse of gas for power generationholds the best potential foradequate power atinternationally competitive costfor industry.”Indeed while Ghana hasbeen counting on gas to fuelelectricity production from thenational grid, gas holds the keyto industrialization of a largescale.Instructively Ghana Gas islooking to use local bulk gasbuying and distributioncompanies to supply gas directlyto industry. Already three suchgas intermediaries are beingestablished in the Tema areawhere industrial demand forpower is highest. Ghana Gas willbe able to take advantage of thereverse West African gaspipeline, which goes fromwestern Ghana to easternGhana to deliver gas fromAtuabo and from the plannednew plant when it comes online.Prudently though, GhanaGas is looking to remove thecountry’s reliance on the WAGP.dr Asante says the company islooking at installing a 278kmgas pipeline onshore betweenTakoradi and Tema and that,“Takoradi and Tema were thetwo critical load centres interms of gas demands and itdidn’t make sense to rely on onepipeline operated by a thirdparty.”Interestingly though it isthat demand in the eastern partthat persuaded GNPC to site itsnew gas plant there too.Industrialists though seesharply increasing gas supply inthat area as a good thing ratherthan as a potential financialalbatross; some industryanalysts predict thatcompetition between Ghana Gasand GNPC is brewing and thiswill drive prices downward, thuslowering power generation coststo the ultimate benefit ofindustry and households alike.Actually though Ghana Gasis way ahead of the rest of thegas industry – and indeed thecountry as a whole – in its plansto put the country’s local gas togood use by making certainstrategic industries viable inGhana for the first time. Indeed,Ghana Gas has already enabledthe emergence of a localceramics industry, providing therequisite huge energyrequirements for heating ateconomically viable cost.Now it is working with theMinistry of Food andAgriculture to use the nation’sindigenous gas to producefertilizer, with the plant to belocated at domunli to produce400,000 tonnes of Urea andNitrogen Phosphorus Potassium(NPK) fertilizers which wouldsave Ghana over US$500 millionin fertilizer import costs everyyear.It is also looking to useGhana’s gas to facilitate thegrowth and development of thecountry’s iron and steel“We havecarefully agreedwith the suppliersto start from alower level ofabout 75millioncubic feet. In thesecond year, wewill move to125million cubicfeet when wemust haveidentified enoughusers to absorbthat volume.industry as this will be key inenabling industrial production,from the automobile industry tomachine parts.But perhaps an even morepotentially pivotal strategy overthe shorter term is the plan touse Ghana Gas to support thecountry’s extractive industry.Gold mining for instance,Ghana’s biggest export revenueearner is highly capitalintensive and for long theindustry has complained aboutinordinate energy costs thatslim its margins, creating thepotential to render Ghanauncompetitive as aninternational mininginvestment destination. Bylowering its energy costs,intends to make Ghana more,rather than less competitive inthis regard.But an even more crucialintention is to use Ghana Gas toensure that government’sambitions of creating anintegrated aluminum valuechain is realized. It isinstructive that Ghana lost thestrategic advantages created byVALCO because of higher powercosts which made productioneconomically unviable.“Government’s ongoingefforts towards creating a fullscale value chain from bauxitemining to the manufacture ofaluminum products arepredicated on competitivelypriced energy and Ghana Gasaims to make sure that energy ismade available all along thesupply chain” he assures.Then there is the third use ofgas, as envisaged by dr Asante,one which he is personallyinvested in because of itspotential benefits to theeconomy and the citizenry: thepowering of the vehicular sectorwith gas to bring downtransport costs. Here heenvisions the use of locallysourced, clean and relativelycheap compressed natural gas toreplace diesel oil to run a widerange of transport modes fromthe railway system now underdevelopment to tricycles whichare becoming increasinglypopular to as light freightcarriers and which have thepotential to replacecontroversial motorcycles as anefficient mode of passengertransport too.Even as GNPC looks to movein on well identified demand inTema, Ghana Gas is alreadylooking further afield. There areplans afoot to make Kumasianother hub for powergeneration and there is aMainline Compressor Station atAtuabo-a third unit-coming onboard to increase the gas supplycapacity.Furthermore the Prestea-Kumasi Gas Pipeline Project,which is 60 per cent complete,would enable Ghana Gas tosupply lean gas to Nyinahin andKumasi for mineral processingand power generation.Another initiative involvesthe Company siting a LiquefiedPetroleum Gas (LPG) BottlingPlant in Axim. To this end sixlicenses have been released bythe National PetroleumAuthority (NPA) towards theexecution of that project.The LPG Bottling Plantwould provide safe LPG bottlesand bottling plants to improveLPG handling safety.The Prestea-Kumasi GasPipeline Project, which is 60 percent complete, dr Asante saidthe project when completedwould enable them to supplylean gas to Nyinahin andKumasi for mineral processingand power generation.As well as all this Ghana Gasis partnering the Ministry ofRailways development toproduce compressed natural gas,which could be used to drivetrain engines, sayingcompressed natural gas wascleaner and much cheaper thanother liquid fuels.development economists arepointing out that if the viableinitiatives for the use of gas –whether locally sourced orimported, are pursued – therewill be plenty of critical uses forall the gas Ghana has, and theeven more in is about to get.Ghana now stands on thecusp of acceleratedindustrialization. Gas is the keyto making it happen not aresource to fret over aboutexcess supply capacity.
Tuesday, July 5, 2022 PAGE 11Sub-Saharan Africa: One Planet,Two Worlds, Three StoriesThis is a press release fromthe International MonetaryFund following its recent jointannual general meetings withthe World Bank and the release,last week of its latest RegionalEconomic Outlook on Sub SaharanAfrica, both done in WashingtonDCSub-Saharan Africa is projected togrow by 3.7 percent in 2021 and3.8 percent in 2022 – a welcomebut relatively modest recovery,suggesting that divergence withthe rest of the world will persist over themedium term.• The crisis has highlighted keydisparities in resilience between countriesin sub-Saharan Africa and has alsoexacerbated preexisting vulnerabilitiesand inequality within each country.Moreover, food price inflation threatens tojeopardize previous gains in food securityand exacerbate social and politicalinstability.• As the pandemic continues,authorities face an increasingly difficultpolicy environment, with rising needs,limited resources, and difficult tradeoffs.Saving lives remains the top priority, butthere is also an urgent need for spendingprioritization, revenue mobilization,enhanced credibility, and an improvedbusiness environment.• International solidarityand cooperation remain vital,not only on vaccination but alsoon addressing other criticalglobal issues, such as climatechange.Washington, dC: Sub-Saharan Africa’s economy is setto recover in 2021 – a markedimprovement over theextraordinary contraction of2020. This rebound is mostwelcome and primarily resultsfrom a favorable externalenvironment, including a sharpimprovement in trade andcommodity prices. In addition,improved harvests have liftedagricultural production. Yet, theoutlook remains highlyuncertain as the recoverydepends on the progress in thefight against COVId-19 and isvulnerable to disruptions inglobal activity and financialmarkets, the InternationalMonetary Fund (IMF) said in itslatest Regional Economic Outlook for Sub-Saharan Africa.“As sub-Saharan Africa navigatesthrough a persistent pandemic withrepeated waves of infection, a return tonormal will be far from easy,” stressedAbebe Aemro Selassie, director of theIMF’s African department. “In the absenceof vaccines, lockdowns and othercontainment measures have been the onlyoption for containing the virus.“At 3.7 percent this year, the recovery insub-Saharan Africa will be the slowest inthe world—as advanced markets grow bymore than 5 percent, while other emergingmarkets and developing countries grow bymore than 6 percent. This mismatchreflects sub-Saharan Africa’s slow vaccinerollout and stark differences in policyspace.“Real per capita income is expected toremain close to 5½ percent below precrisistrends, with permanent real output lossesranging between -21 percent and -2percent. The non-resource-intensivecountries are growing at a much fasterrate than resource-rich countries—apattern that precedes the crisis and hasbeen amplified by recent events,highlighting fundamental differences inresilience. Non-resource-intensivecountries have a more diverse economicstructure, which helps them adjust andrecover faster. Commodity price increaseshave also helped some countries, but thesewindfall gains are often volatile andcannot substitute more enduring sourcesof growth. Furthermore, differences infiscal space also help to explain crosscountrydifferences in the current pace ofrecovery.“Widening gaps between countries““As sub-SaharanAfrica navigatesthrough apersistentpandemic withrepeated waves ofinfection, a returnto normal will befar from easy,”stressed AbebeAemro Selassie,Director of theIMF’s AfricanDepartment.have been accompanied by growingdivergence within countries, as thepandemic has had a particularly harshimpact on the region’s most vulnerable.With about 30 million people thrown intoextreme poverty, the crisis has worsenedinequality not only across income groups,but also across subnational geographicregions, which may add to the risk ofsocial tension and political instability. Inthis context, rising food price inflation,combined with reduced incomes, isthreatening past gains in povertyreduction, health, and food security.“Furthermore, increasing debtvulnerabilities remain a source of concern,and many governments will have toundertake fiscal consolidation. Overall,public debt is predicted to decline slightlyin 2021 to 56.6 percent of GdP but remainshigh compared to a pre-pandemic level of50.4 percent of GdP. Half of sub-SaharanAfrica’s low-income countries are either inor at high risk of debt distress. And morecountries may find themselves underfuture pressure as debt-service paymentsaccount for an increasing share ofgovernment resources.Against this backdrop, Mr. Selassiepointed to a number of policy priorities.“The difficult policy environment thatauthorities faced before the crisis has beenmade more demanding by the crisis.Policymakers face three key fiscalchallenges: 1) to tackle the region’spressing development spending needs; 2)to contain public debt; and finally, 3) tomobilize tax revenues in circumstanceswhere additional measures are generallyunpopular. Meeting these goals has neverbeen easy and entails a difficult balancingact. For most countries, urgent policypriorities include spending prioritization,revenue mobilization, enhancedcredibility, and an improved businessclimate.“The recent SdR allocation has boostedthe region’s reserves, easing some of theburden of authorities as they guide theircountries’ recovery. And rechannelingSdRs from countries with strong externalpositions to countries with weakerfundamentals could help to bolster theregion’s resilience.“On COVId-19, internationalcooperation on vaccination iscritical to address the threat ofrepeated waves. This would helpprevent the divergent recoverypaths of sub-Saharan Africa andthe rest of the world fromhardening and becomingpermanent fault lines, whichwould jeopardize decades of hardwonsocial and economic progress.“Looking further ahead, theregion’s vast potential remainsundiminished. But the threat ofclimate change—and the globalprocess of energy transition—suggest that sub-Saharan Africamay need to adopt a moreinnovative and greener growthmodel. This presents bothchallenges and opportunities, andit underscores the need for boldtransformative reforms andcontinued external funding. Suchmeasures may not be easy, butthey are key prerequisites of thelong-promised African century.
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Business Analyst - July 5

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