Ghana: Small Businesses Totter Under Severe Energy Crisis, High Cost of Credit

Ghana’s small businesses are currently reeling under the difficult outcomes of a prolonged electric power crisis and high cost of borrowing in a worsening economic climate.

The story of Francis, a business owner, describes the harsh realities of the present electric power crisis that many manufacturers have to contend with. Francis owns a small business that produces purified water in Accra. A few days ago, I hitched a ride on his truck home, after we attended a social event in Kanda together.

Lantern and course books
Photo Credit: George AgboKlu

The truck we rode on is one of eight that transport the products (bottled drinking water and sachet water or pure water) from his factory near Legon to customers around the city. Spurred by initial positive returns, he is motivated to make more capital investments into the business. He has increased his fleet and expanded his production from two lines to five. Currently, he employs 40 workers.

His new expansion comes with higher demand for raw water and more electric power for production. As an entrepreneur Francis has had to struggle with erratic water and electricity supply, the two being the most critical inputs for his business.

These compel him to hold up production all the time, “On some days when we have water, the lights are out; and the days, there’s light, we don’t have enough water,” he told me.

Naturally, the business must make good returns on the investments for the owner to repay its creditors. But the prolonged power crisis today remains a significant test to the survival of the business and others like his. “The workers must be paid as they continue to come to work”, he explained.


Francis has an elaborate idea what the solutions are to overcome these problems, which perhaps are the most challenging obstacles to his business currently. They are: (a) to drill a bore-hole, to ensure reliable supply of fresh water, and (b) to install a diesel powered heavy duty generator for reliable electricity supply.

So far he has raised GH12,000 to construct the bore-hole fitted with a submersible pump. An assessment of the power requirement has been completed and he needs GH¢70,000 to buy a new generator set.

Not an option

Now, to raise more capital to complete the project, a loan from the commercial banks is not one of the options on his desk. “I won’t go for a commercial bank loan. No. The interest rates are too high now.” He believes strongly that a bank loan is not a viable option for the credit he needs so badly for his business.

The existing high cost of credit is rising further amid a worsening macroeconomic climate. Interest rates are above 30%, as the cedi continues to depreciate, losing more than 16% of its value against the US dollar as of mid April. These, according to economic analysts are the outcome of instability caused by high fiscal and current account deficits. Annual economic growth rate is projected at 3.9% for 2015.

Notwithstanding the unstable economic environment, Francis believes raising that money to acquire a power generator is important especially now, in order to take advantage of current hot weather conditions where demand for water is high.

Ghana’s current electric power crisis began in 2012. Since then, the government has proffered several explanations and given more than a few promises of a solution within certain timelines. Two years on, the good people of Ghana are waiting anxiously for a reprieve to the excruciating energy crisis.

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