Ghana’s power sector has experienced rapid growth in the last decade. According to the Energy Commission, total electricity generation almost doubled from 11.2 GWh in 2011 to 22.1 GWh in 2021, representing an annual average growth rate of 7%. In order to sustain the growth rate and extend the derived benefits to other sectors of the Ghanaian economy, a robust legal framework has been established to promote local content and local participation in the power sector.
The local content and participation requirements in Ghana’s power sector are governed by the Energy Commission Act, 1997 (Act 541) as amended by the Energy Commission (Amendment) Act, 2016 (Act 933) (the Energy Commission Act), the Renewable Energy Act, 2011 (Act 832) as amended by the Renewable Energy (Amendment) Act, 2020 (Act 1045) (the Renewable Energy Act) and the Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations, 2017 (LI 2354) (the Regulations). The local content and participation requirements cover the following areas: local content and local participation plan; procurement of goods and services; thresholds for development projects; use of local professional and other services; employment and training; establishment of local offices; use of local equipment and restrictions on operations of foreign entities.
Local Participation
The Regulations seek to achieve a minimum of 51% local equity ownership in the electricity supply industry.[2] The electricity supply industry is defined to include i) activities that require a licence under the Energy Commission Act or the Renewable Energy Act and ii) activities relating to the manufacture of electrical appliances, electrical equipment and renewable energy equipment.[3] Activities in the power sector that require licences are production, transportation, storage, distribution, sale and marketing, importation, exportation and re-exportation, and installation and maintenance (the Licensed Activities).[4]
For the renewable energy sector, an initial minimum level of 15% local equity ownership is required for entities undertaking Licensed Activities.[5] This level is expected to be increased to 51% within 10 years of operations.[6] For the non-renewable energy sector, the required initial level varies depending on the activity involved. Initial minimum local equity ownership levels of 15% and 30% are required for entities undertaking wholesale electricity supply and electricity distribution activities respectively.[7] This is expected to be increased to 51% within 10 years of operations.[8] For entities undertaking electricity sales and brokerage activities, an initial minimum level of 80% local equity ownership is required and this is expected to be increased to 100% within 5 years of operations.[9] For entities undertaking investments in electricity transmission infrastructure, an initial minimum level of 15% local equity ownership is required and this is expected to be increased to 49% within 10 years of operations.[10]
In addition, the rights of a Ghanaian under a contract relating to the electricity supply industry are not transferable to a non-Ghanaian.[11] The Regulations also provide that an equity shareholding cannot be transferred to a non-Ghanaian.[12] This suggests that the shares of a non-Ghanaian cannot be transferred to another non-Ghanaian, even if the prescribed minimum local equity ownership levels have been complied with. Although the aim of this provision is to improve the retention of economic benefits of the electricity supply industry in the country for Ghanaians, it may have an unintended consequence of preventing non-Ghanaians from being able to freely transfer their interest where they cannot find a Ghanaian with sufficient capital to purchase the interest due to the capital intensive nature of the industry. It is noted that the Energy Commission has proposed amendments to provisions of the Regulations relating to restrictions on the transferability of interests and/or shares to non-Ghanaians. Upon the enactment of these amendments, the interests and/or shares of participants in the electricity supply industry may be transferred to non-Ghanaians. Such transfers may however be subject to the approval of the Electricity Supply Industry Local Content and Local Participation Committee (the Committee) and compliance with the thresholds for local participation.
For entities established to manufacture electrical appliances, electrical equipment or renewable energy equipment (Manufacturers), a minimum of 40% equity ownership by an indigenous Ghanaian company (IGC) is required.[13] An IGC is defined as a state-owned company or a company incorporated under the Companies Act, 2019 (Act 992) that has at least 51% of its equity owned by a Ghanaian and Ghanaians holding at least 80% of executive and senior management positions.[14] Furthermore, with the exception of entities listed on the Ghana Stock Exchange and other public companies, a Ghanaian cannot transfer more than 60% of his equity shareholding in a Manufacturer, to a foreigner.[15]
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