Month: February 2024

Intellectual property refers to inventions of the mind that are intangible in nature and are protected such as trademarks, Patents, Copyrights, and related rights and industrial designs.

They are a core component of most businesses in the 21st Century and valuable assets for which management efficiencies are as important as any other asset. The dynamics of globalization and the effects that it has on strategies for every business, whether national or multinational, require that businesses pay closer attention to opportunities that help maximize benefits to the company and reduce costs to free up resources for other strategic interests of the business.

Given its territorial nature, the protection of IP has often been undertaken by local, regional, and multinational entities at the national level. That means that subsidiaries or branches at the national level are left to determine and follow up on the protection and enforcement of IP rights in their respective jurisdictions. This in turn impacts the cost of protection and enforcement, quality control, and ultimately the overall business strategies of the group.

A number of regional and international frameworks for IP protection however exist that can help reduce dispersed protection measures and facilitate central management and uniform strategy formulation for the group without impacting on local peculiarities of the business. Though enforcement ultimately remains territorial, these regional and multinational processes greatly contribute to better and central control of enforcement strategies and facilitate the exchange of best practices.

The ARIPO System

In this edition, we provide commentary on the ARIPO System which is the key Africa region framework of significance to multinationals with Kenyan operations/interests.

ARIPO was the result of an idea mooted at a regional seminar on patents and copyright held in Nairobi in the early 1970s and the first draft agreement on the creation of a regional intellectual property organization was adopted in 1976 by a diplomatic conference – The Lusaka Agreement [also known as the draft Agreement on the Creation of the Industrial Property Organization for English-speaking Africa (ESARIPO)]. The idea was that the organization would serve mainly Anglophone countries. In practice that remains the case with very few exceptions. A number of lusophone and francophone countries have since joined ARIPO (The latest being the Republic of Sao Tome and Principe). Membership remains open to any member of the African Union or the Economic Commission for Africa.

The principal idea behind the establishment of ARIPO was the pooling of resources of member countries in industrial property matters in order to utilize the maximum available resources in these countries to ensure effective protection of industrial property, capacity building, and training of staff in their respective industrial property institutions, development, and harmonization of laws and general efficiencies.

Legal Framework

The Lusaka Agreement on the Creation of the African Regional Intellectual Property Organization (ARIPO)

The Lusaka Agreement was adopted at a diplomatic conference at Lusaka (Zambia) on December 9, 1976, and established ARIPO at Article 1 thereof.

Pursuant to its functions and powers under the Agreement (Article VII) the Administrative Council of ARIPO has developed protocols and regulations that form the background of the legal and operational design of intellectual property protection in member states under the system. These include:

The Harare Protocol on Patents and Industrial Designs within the Framework of the African Regional Industrial Property Organization

The Banjul Protocol on Marks; and

The Swakopmund Protocol on the Protection of Traditional Knowledge and Expressions of Folklore.

Membership to the Lusaka Agreement does not necessarily imply membership to the protocols. Each protocol applies to different aspects of intellectual property and membership to each is voluntary.

The Harare Protocol

The Harare protocol applies to the protection of patents and Industrial designs and currently has 19 contracting States, namely; Botswana, The Gambia, Ghana, Kenya, Lesotho, Liberia, Malawi, Mozambique, Namibia, Rwanda, Sierra Leone, Sudan, Swaziland, Tanzania, Uganda, Zambia, Zimbabwe and the Democratic Republic of São Tomé and Príncipe (the latest member as at August 19, 2014).

How the filing System works: brief overview

The Harare Protocol provides a framework for the filing and protection of patents and industrial designs within member states.  The Protocol is supplemented in its provisions by administrative regulations that make further and detailed provisions for the manner in which an application is treated from the date of filing to the grant of patent or refusal as the case may be.

There are principally two regulations under the Harare protocol in this regard;

1. The regulations for implementing the protocol on patents and industrial designs within the framework of the African Regional Intellectual Property Organization (‘the regulations); and
2. The administrative instructions under the regulations for implementing the protocol on patents, industrial designs and utility models within the framework of the African regional intellectual property organization (the Administrative instructions)

The regulations are made by the Administrative Council pursuant to section 5 of the Harare Protocol and mainly deal with substantive matters relating to the content of applications filed with the ARIPO office including on the requirements for patentability, the right of priority, Appeal procedures against decisions of patent examiners and treatment of PCT applications under the ARIPO system.

Administrative instructions, on the other hand, are made by the office of the Director General of ARIPO pursuant to rule 2(5) (a) of the regulations and mainly deal with the day-to-day administrative requirements of ARIPO including the formality details in respect of applications under the protocol, filing timings, fees payable for each service, detailed steps in the filing and examination of applications up to grant, notification and communication procedures, the forms to be used for various filings etc.

Patents

In summary, the ARIPO system is registration-based and subject to notifications of refusal by national offices whereas the PCT system is a filing system.

An applicant for the grant of a patent for an invention or the registration of an industrial design can, by filing only one application, either with any one of the Contracting States or directly with the ARIPO Office, designate any one of the Contracting States in which that applicant wishes the invention or industrial design to be accorded protection.

The ARIPO Office, on receipt of the patent application, undertakes both formality and substantive examination to ensure that the invention that is the subject of the application is patentable (i.e. it is new, involves an inventive step, and is capable of industrial application).

If the application complies with the substantive requirements, copies thereof are sent to each designated Contracting State which may, within six months, indicate to the ARIPO Office that, according to grounds specified in the protocol, should ARIPO grant the patent that grant will not have effect in its territory.

For industrial design applications, only a formality examination is performed. If the application fulfills the formal requirements, the ARIPO Office registers the industrial design which has effect in the designated States. However, the same right to communicate to the ARIPO Office within six months that the registration may not have effect in the designated States concerned is reserved.

The Administrative Council, at its Second Extraordinary session held in April 1994, adopted amendments to the Harare Protocol and its Implementing Regulations to create a link between the protocol and the WIPO-governed Patent Co-operation Treaty (PCT). This link commenced operation on July 1, 1994, and has the following effects:

Any applicant filing a PCT application may designate ARIPO which in turn means a designation of all States party to both the Harare Protocol and the PCT;

The ARIPO Office acts as a receiving office under the PCT for such States; and

The ARIPO Office may be elected in any PCT application.

All current Harare Protocol Contracting States are also signatories to the PCT.

The Banjul Protocol

The Banjul Protocol on Marks, adopted by the Administrative Council in 1993, establishes a trademark application filing system along the lines of the Harare Protocol. Under the Banjul Protocol, an applicant may file a single application either at one of the Banjul Protocol Contracting States or directly with the ARIPO Office. The application should designate Banjul Protocol Contracting States as the States in which the applicant wishes the mark to be protected once the ARIPO Office has registered it.

States currently party to the Banjul Protocol are Botswana, Lesotho, Liberia, Malawi, Namibia, Swaziland, Tanzania, Uganda and Zimbabwe. (Total: 9 States.). Kenya is yet to accede to this treaty so trademark filing can only be done locally or through the Madrid system as we shall see in the next edition of the newsletter.

Since 1997, the protocol has been extensively revised in order to make it compatible with the TRIPs Agreement and to make it more user-friendly.

Conclusion

The ARIPO system is highly advised for clients with regional interests. We represent a number of clients in patent applications using the system and recommend it for cost savings and efficient management of the application process (more so for bulk applications) in several member countries.

In the next edition of the newsletter, we shall provide commentary on international filing systems to give a broader perspective for multinationals operating in Africa and beyond.

Conventional debt and equity financing models have become largely inaccessible amidst the economic slump that has been occasioned by the global financial crisis. The ramifications of this have been felt in Kenya where there has been a slow-down in lending to the private sector. This has inadvertently resulted in a deceleration of economic growth as traditional lenders have scaled back on loan disbursements. This has also been exacerbated by the capping of interest rates chargeable by banks and financial institutions which was introduced in 2016.

The decline in credit issuance and uptake has affected the recent slowdown of Kenya’s economic performance due to the general election in 2017 which greatly affected the country’s economic outlook. These are clear manifestations of a paradigm shift needed in Kenya in the manner in which capital is raised by various entities. But there is hope, with the world economy bouncing back from the global recession in 2010, reforms have been made in the traditional financing models in Kenya. Against this backdrop, companies now have the recourse to explore alternative financing models to remain competitive and profitable.

Sale and Leaseback Transactions

Sale and leaseback financing has proved to be an attractive option for some companies that seek to keep up with their growth strategies. Essentially a sale and leaseback transaction involves a sale of an interest in property with a reservation on the possessory terms. The underlying characteristic of these kinds of transactions is that the seller acts as a lessee and they raise the capital through the property that they hold by transferring the property to a buyer through the sale. This transaction enables the seller to dispose of the property and obtain capital injection for the business while maintaining the use of the same property at an agreed lease premium for a specified term. This is especially beneficial to a buyer who seeks to incur the least possible maintenance costs of the property.

Characteristics

A sale and leaseback financing model varies from traditional financing models because it typically entails:

A sale of assets by an entity that desires to raise capital from the property to an investor who seeks to achieve a low-risk, high-yield investment

Simultaneous obtaining of a long-term lease of the property by the seller-lessee from the buyer-lessor which enables the continuing possession and use of the property by the seller-lessee in exchange for payment of rentals at an agreed premium

The retention by the seller-lessee of most of the risk and rewards incident to ownership save for the right to mortgage where the lease is an operating lease

Transfer of substantially all the risks and rewards incident to ownership where the lease is a capital lease.

Classification of Leases

Whether a lease shall be classified as an operating lease or a capital lease is usually agreed upon at the inception of the transaction. It is important to classify the lease the parties intend to enter into as both have different effects on the parties.

A lease will be classified as an operating lease where the rental premiums are considered operating expenses in the seller-lessee’s book of accounts, and the property leased does not form part of the seller-lessee’s balance sheet. On the other hand, a capital lease is considered a loan to the seller-lessee and is stated as such in the seller-lessee’s books of account. Most leases in a typical sale and leaseback transaction will be operating leases. However, a capital lease would arise where there is a buyback agreement contained in the lease; there is a buyback option with a defined price in the lease; or the lease value is greater than ninety percent (90%) of the value of the property.

Advantages and Disadvantages

Certain advantages have been identified to inure with the sale and leaseback financing model. One key motivation for adopting this financing model is the tax advantages that flow from these transactions. It has been noted that in the majority of these transactions, the seller is usually motivated by the need to realize immediate loss which is used to offset the seller’s operating income. The seller in essence receives proceeds from the sale of a non-liquid asset, yet retains for a term the use and possession of the asset.

The seller in a sale and leaseback transaction obtains a greater amount of capital through a leaseback than when they opt for conventional types of borrowing.

Needless to say, this financing model is essential in providing working capital to the seller-lessee who will realize approximately one hundred percent (100%) of the market value of the property unlike debt and equity forms of financing which may not result in the same returns. This is especially important in markets experiencing fluctuations in conventional lending sources.

For the buyer-lessor, this financing model allows it to have a hands-off approach to the management of the property as it incurs no responsibility for the operational or managerial aspects of the property which is left to the seller-lessee.

A sale and leaseback transaction also comes with its fair share of challenges, a notable one being a high-interest rate on the lease that the rental property may attract. Tax implications may also be evident with recent changes in the International Financial Reporting Standards.

The fact that the property is no longer under the ownership of the seller lessee also means that the seller-lessee may have no say with regard to the interest that the buyer-lessor will charge on the leased property. This may in the long run mean that the seller-lessee has to incur higher costs in using and managing the property as this responsibility does not rest with the buyer-lessor. This denotes an inherent risk that is evident in many lease arrangements.

It is clear that the sale and leaseback financing model is an option Kenyan companies could consider in their quest to raise capital to finance their growth strategies in the market. Numerous advantages can be drawn from the adoption of this model, especially in light of the drawbacks of conventional financing models.

Moreover, this model is attractive to entities that are unable to attract a wide variety of financing. This financing model may be useful for companies that may want to accrue some capital to use for their expansion initiatives. Ultimately, these entities could benefit from unlocked real estate value, reduction in a company’s investment in non-core business assets, such as buildings and land, and freeing-up of the entity’s cash in exchange for executing a long-term lease

Mergers and acquisitions (M&A) activities have become an important channel for investment in Africa for both global & local market players.  Over the past decade, Africa’s real GDP grew by 4.7% a year, on average—twice the pace of its growth in the 1980s and 1990s. Therefore, the continued desire to purchase and acquire financial institutions in Africa is not by accident. As the continent readies itself for post-pandemic recovery, the opportunities presented by the AFCFTA across Africa and the post-pandemic focus will remain key factors in attracting valuable mergers and acquisition activity. This article examines the case of Crane Bank Uganda Limited (CBL) in Uganda and offers insights on the role of central banks as statutory liquidators and the risks businesses must avoid while doing business in Africa.

CBL was closed and placed under receivership by the Bank of Uganda (BOU) in September 2016 following an audit report that revealed insufficient capital levels, shrinking liquidity ratios, surging loan default levels, and gross mismanagement, among others. The non-performing loan ratio recorded in the bank’s credit portfolio was estimated at 30 percent, a figure higher than the overall industry loan default rate that stood at less than 10 percent during the same period. Bank of Uganda subsequently transferred assets of CBL to DFCU Bank (a rival bank in Uganda) in an acquisition transaction the subject of this article.

Dr. Sudhir Rupareila (largest shareholder) was subsequently sued by BOU as a liquidator for siphoning $111.8 million from the failed bank over three years. The Liquidator equally sought recovery of 48 properties forming CBL’s branch network across Uganda held in the names of Dr. Sudhir Rupareila and Meera Investments as shareholders of CBL.

Uganda’s auditor General’s report revealed that BOU did not carry out a valuation of the assets and liabilities of CBL but relied on the inventory report and due diligence undertaken by DFCU in accepting their bid. BOU invited DFCU to bid for the purchase of assets and assumption of liabilities of CBL on 9th December 2016 while DFCU submitted the bid on the 20^th December 2016 a day before the production of the inventory report.  It is not surprising that DFCU 2021 results showed it had lost UGX313 billion or 12% of its customer deposits. Deposits with their lending dropping by 15% from UGX1,775.3 billion to UGX1,508.4 billion affecting the value of their total assets by nearly 10%

Parliament probe into the sale of CBL revealed that there were no guidelines or policies in place to guide the identification of the purchasers of banks to determine the procedures for the sale and transfer of assets and liabilities of the defunct banks to the eventual purchasers and that BoU did not document the evaluation of alternatives and the assumptions arrived contrary to section 95 (3) (b) of the FIA, 2004.

The reliance by BOU on the due diligence undertaken by an interested party and eventual purchaser was imprudent, and an abdication of its role under section 95 (3) of the FIA, 2004. BoU in conducting this sale owed a fiduciary duty and duty of care to ensure that all its activities are conducted in the best interests of the financial institution. Interestingly, the Supreme Court of Uganda on the 25^th day of June 2022 placed a check on the supposed blanked authority of BOU as a statutory liquidator holding that liquidation of the defunct Crane Bank did not affect its corporate existence as a company. Once liquidation ended, the Shareholders were entitled to reclaim whatever assets were held by the company after the statutory liquidation. The Directors of Crane Bank successfully blocked the takeover of properties claimed by BOU as statutory liquidator as forming and parcel of the liabilities taken over by DFCU upon acquisition of the defunct bank.

Availability of credit and at competitive prices are major factors that promote the growth of businesses. Two of the main problems that face Ghana’s small and medium-scale enterprises arethe unavailability of credit and the cost of credit. A critical look at this problem reveals that it is not primarily unavailability but rather, the conditions for accessing available credit that most entities are unable to meet. In particular, the requirements for businesses to provide comfort to financial institutions on their ability to repay the loan and acceptable collateral as a fallback measure in the event that they are unable to repay.

We will take a look at the issues relating particularly to collateral arrangements from both the perspective of borrowers and lenders.

 

Funding of Businesses

Businesses require capital for their operations to generate income. Capital is provided in two main ways – through the resources of the business owner or by borrowing from relatives, friends, business associates or financial institutions. Financial institutions lend money to make money. Two factors primarily determine the ability of businesses to obtain credit from financial institutions – first, the legal capacity of the entity and second, its creditworthiness.

For a business to be credit-worthy, it must demonstrate its ability to repay the loan given. It can do this by showing that there are potential future receivables that will be available to repay the loan. A business must demonstrate that:

Lenders will look at the whole business cycle of the entity to conclude on the above factors. Assessing the operations of the business including its potential income is, therefore, key to the ability of the business to secure credit. This will also include looking at the borrower’s previous financial statements to determine the past financial performance of the business. In spite of the borrower’s ability to meet the above conditions, there are events that could happen in the future which may affect the above factors. Lenders, therefore, want a fallback measure to recover loanswhere such future events occur. This introduces the issue of collateral. Typically, if lenders are assured of the above position, the issue of collateral may not arise.

Collateral

Collateral generally covers fallback guarantees and securities available to a lender in the event the borrower defaults in repaying the loan as agreed under the loan agreement. Collateral or security interest may generally cover:

Collateral is a fallback measure. Lenders do not grant a loan primarily with a view to enforce the fallback measure (collateral). Lenders must, therefore, require and obtain any of the above collateral only after assessing that there are potential risks to the operations of the business which may affect the future receivables that will be used for the repayment of the loan.

Over-collateralization

Imagine you have a house valued at Ghc150,000. You have applied to the bank for a loan of GHc10,000 for your company and the bank has requested the house as collateral. In addition, the bank has asked that you provide a personal guarantee in the event the company is unable to pay. Then, for good measure, the bank has asked that you pledge your shares in the company as collateral. This situation is the over-collateralization situation. Another example may be where on an application for a personal car loan, the financial institution requires a guarantee from your employer, your salary to be passed through the financial institution with charge over the account, a charge over the car, assigning proceeds from comprehensive insurance over the car, and taking life insurance with proceeds assigned to the financial institution. This is after the usual requirement for the borrower to pay upfront 10 – 25% of the cost of the car. The situation can be compared to intending to kill a fly with a sledge-hammer. From the borrower’s perspective, that is problematic. The issue of over-collateralization has been one of the silent factors discouraging businesses from accessing credit.

Whilst financial institutions may see it as fully underwriting all possible risk, this adds to the cost of credit particularly since the security documents must be stamped and perfected. The cost of stamping is 0.5% of the secured amount for the principal security, and 0.25% of the secured amount for each additional security. It does not matter if all the security are included in the same document. This must be a problem for the financial institution itself as it makes the institution less competitive. Such cost, together with the interest charged, processing and other applicable fees make the cost of obtaining a loan prohibitive for businesses. This feeds into the narrative of high cost of lending. In order to be competitive, financial institutions must be mindful of the type of security and number of securities to take as a fallback position in the event of default of the borrower. A number of ways are suggested below for consideration by financial institutions.

Avoiding over-collateralization

Any of the suggestions below must be implemented within the context of assessing the potential risks that the collateral is to cover. In order to avoid over-collateralization, the following can be implemented:

The suggestions above are not exhaustive and must be implemented within the specific context of the risk exposure the financial institution intends to cover.

Conclusion

It is important for businesses, especially small and medium–scale enterprises, to always assess the cost of borrowing prior to entering into any financial transaction. A business must check its financial health and ensure that repayment of loans will not have the potential to cripple the business. Where security is required, the business must ensure that the security provided is commensurate with the loan amount plus interest. As much as possible, businesses should attempt to negotiate fair collateral packages rather than settling for over-collateralized loans out of desperation for a loan. Financial institutions should have policies on requirements for collateral and nature of security to take. This will feed into the competitiveness of financial institutions.

Many businesses require financing for growth and financial institutions also need to provide these credit facilities in order to grow. Although lending and borrowing may seem like an everyday transaction and fairly straightforward, it is particularly important for lenders to aim at reducing credit cost while providing financing to businesses. This will make loans more accessible for all types of businesses and will ultimately contribute to business and financial growth for both lenders and borrowers. A win-win for all.

Replacing traditional sources of energy completely with renewable energy is going to be a challenging task. However, by adding renewable energy to the grid and gradually increasing its contribution, we can realistically expect a future that is powered completely by green energy -Tulsi Tanti.[founder of Suzlon Energy]

Ghana’s renewable energy sector again took centre stage at the 2022 COP27 where the President of Ghana assured world leaders of Ghana’s commitment to increase renewable energy in its energy mix as part of the nation’s framework on energy transition. In 2010, Ghana set a target to increase the proportion of renewable energy (solar, wind, mini-hydro, and waste to energy) in its energy mix by 10% by 2020 under the Energy Sector Strategy and Development Plan.  This led to the passing of the Renewable Energy Act (Act 832) in 2011 to provide the legal and regulatory framework for renewable energy activities in the power sector. However, according to the 2020 Energy Outlook for Ghana, by the end of 2020, Ghana had attained less than 2% renewable energy in its energy mix. The 10% target has now been pushed to 2030 under the Strategic National Energy Plan (2019). Achieving this target is heavily dependent on private sector participation in power generation. This article highlights the current state of private sector participation in the renewable energy sector and some challenges that make the sector unattractive for private investment. Some suggestions on what can be done to improve the sector are also discussed in the article.

Status of Ghana’s renewable energy sector

Ghana is endowed with abundant renewable energy potential such as solar, wind, biomass, wave, and tidal energy. Act 832 defines “renewable energy sources” as renewable non-fossil energy sources like wind, solar, geothermal, wave, tidal, hydropower, biomass, and landfill gas. Hydro was also defined as water-based energy systems with a generating capacity not exceeding 100MW (i.e. small-scale hydro). Among these, solar energy has been the most popular due to environmental and social factors.  The Energy Commission, which is the regulator of the sector, has since 2011 issued over 140 licenses for the development of grid-connected solar, wind, biomass, waste-to-energy, and small-scale hydro-renewable projects which demonstrates interest in the sector. However, only eight (8) projects have been developed so far. This is one of the reasons the Energy Commission has since 2017 placed a moratorium on the issuance of wholesale supply licenses for the renewable energy sector.  There are seven (7) solar plants, four of which are owned by state-owned power producers (i.e. Volta River Authority and the Bui Power Authority) and two owned by independent power producers (IPPs); one small-scale hydro plant owned by Bui Power Authority and one biomass power plant owned by an IPP. The installed capacity of these seven projects is 112.1MW which constitutes 2.1% of the total installed energy capacity of 5,449.1MW.

With the amendment of Act 832 in 2020, the definition of “hydro” has been amended to remove the capacity restriction and so, all hydro plants regardless of capacity are considered renewable resources. This brings the Akosombo, Kpong, and Bui hydro plants (which together constitute about 28% of the installed capacity) into the renewable energy mix.

Attempts to attract private sector investment

Generally, the cost of renewable energy projects is known to be high in comparison to non-renewable projects due to factors such as the cost of the technologies, difficulty in obtaining equipment and spare parts, and difficulty in finding the expertise for development, operation, and maintenance. However, project costs have been reduced over the years due to increased investment (public and private) in projects, technologies, and the capacity of the developers. One of the major attempts by states to promote renewable energy is to create an enabling investment climate for renewable energy through its legal and regulatory framework.

Ghana’s Renewable Energy Act has attempted to promote investment in the sector by introducing many incentives. These include:

1. a mandatory connection policy where transmission and distribution system operators are obliged to provide connection services for electricity from renewable energy;
2. a renewable energy purchase obligation where distribution companies and bulk consumers are required to procure a percentage of their total purchase of electricity from renewable energy sources;
3. a feed-in-tariff system comprising of a tariff rate determined by the Public Utilities Regulatory Commission (PURC) which was substantially higher than tariffs for power from other sources and was guaranteed for a ten (10) year period; and
4. the development of the Renewable Energy Fund to provide financial support for the promotion, development, and utilization of renewable energy.

However, with the amendment of the Act in 2020, the purchase obligation is now limited to only bulk consumers. Also, the feed-in-tariff system has been replaced with a competitive procurement system for the purchase of power from renewable energy suppliers. The scrapping of the feed-in-tariff rates may be a result of the reduction in the price of renewable energy systems and the resultant reduced cost of power generation.

Challenges

Considering the number of privately developed renewable energy projects in Ghana, it is clear that the sector has not seen as much private sector investment as expected. Some challenges identified are discussed below.

1. Access to long-term affordable local funding to minimize capital costs is a major challenge faced by players in the sector. Although the Renewable Energy Fund has been set up by the Act, a cursory glance at the government budget over the years does not indicate any specific allocations to the Fund although budgetary allocations are made for renewable energy development. Related to this is the high cost of financing for power projects in Ghana due to Ghana’s high-risk profile for power projects stemming from the country’s credit rating, history of legacy debt, and potential political risks from changes in government or government policy decisions. These risks tend to make financing more expensive. Also, since there are limited local sources of funding, most players depend on external sources of funds which are usually priced in foreign currency and expose the player to foreign exchange risks.
2. Another challenge relates to the solicitation process for power projects. Historically, power purchase agreements (PPAs) have been procured through unsolicited proposals from IPPs. This is one of the reasons for the deemed oversupply situation in Ghana which led to the termination and re-negotiation of some PPAs by the Government of Ghana in 2018. In the absence of a transparent, competitive power procurement process that is based on a needs assessment, private players cannot risk such investments. It is worth noting that in 2019, the government issued a policy for the Competitive Procurement of Energy Supply and Service Contracts. However, this policy is yet to be fully implemented.
3. The limited availability of experienced personnel in Ghana to construct, operate, and maintain renewable energy technology is also a challenge for private players in the sector. The absence of local capacity necessitates expensive foreign expertise which increases project costs. The Energy Commission (Local Content and Local Participation) (Electricity Supply Industry) Regulations (L.I. 2354) which was passed in 2017 intends to bridge the local capacity gap by including mandatory training and employment of locals to build local capacity over time, adequate monitoring is required to achieve local content objectives.
4. Land acquisition is also a major challenge for renewable energy projects especially solar and wind which usually require large tracts of land. Land acquisition in Ghana is, however, fraught with a lack of certainty on ownership of land, multiple sales, and encroachment on project sites. These challenges with land acquisition do not attract investment in the sector.
5. Another challenge is the knowledge gaps in the potential of renewable energy. The general perception is that renewable energy is expensive due to the high initial costs and therefore, renewable energy is not regarded as an economical source of power especially for non-residential purposes. However, the costs of renewable energy technologies have reduced significantly over the years making it a cost-effective source of power compared to non-renewable sources. Also, the role of renewable energy in reducing carbon emissions and combating climate change makes it not only economically beneficial but environmentally sustainable.

Recommendations

A lot can be done to make our renewable energy sector more attractive.

• First, the institutional framework must adopt a more “investor-friendly” approach. This may take the form of creating a well-resourced Renewable Energy desk at the Energy Commission which liaises with other regulators particularly, GRIDCo, the Environmental Protection Agency (EPA), Lands Commission, Ghana Investment Promotion Centre (GIPC), Ghana Immigration Service, National Fire Service and local authorities for all the permits, licenses or any other assistance the developer may require from these institutions. Such a one-stop shop for all regulatory matters will simplify the process for market entry and operation.
• Also, incentives can be introduced to promote private-sector participation. This may take the form of discounted prices for license and permit applications from regulators, provision of land or support with land acquisition, and assistance with access to utility and infrastructure. Also, the development of a carbon market for the trading of carbon credits can be explored as an option to incentivize companies to reduce emissions. For example, the development and utilization of renewable energy power projects will generate carbon credits for organizations which can be traded. Certainly, such a market will require some regulation, and the Government of Ghana has indicated that a carbon market policy is being developed. Such incentives will encourage investment in the renewable energy sector.
• Another way of enhancing participation in the sector is to develop and implement a procurement process that is open, transparent, competitive, and based on a needs assessment. Also, all state entities and agencies must be aligned with this policy to ensure uniformity across the sector. This will help to create certainty in the sector which will encourage private sector participation.
• In line with the objective of the Local Content Regulations, there must be emphasis on technical training and capacity building which aligns with the needs of the renewable energy industry. This will require coordinating with the technical and academic institutions to ensure that the training provided by these institutions aligns with the capacity needs of the industry. Moreover, the implementation of the Local Content Regulations must balance the interests of both local and foreign players so as not to discourage foreign participation. To this end, the Energy Commission should develop a pool of qualified domestic players and service providers that foreign players can partner with to meet local content and local participation requirements.
• Admittedly, access to local funding is crucial and Ghana may not be in the position to provide grants from internally generated funds. However, some sources of local funding can be exploited. For example, The 2021 Guidelines on Investment of Tier 2 and 3 Pension Scheme Funds have introduced Green Bonds as part of the products in which pension funds can invest. According to the Guidelines, pension funds can invest up to 5% of the Scheme Asset under Management (AUM) in Green Bonds and this can be used to provide local funding for renewable energy projects. Also, the Ghana Infrastructure Investment Fund (GIIF) and the newly set up Development Bank of Ghana (DBG) can look into creating sustainable financing products or programs designed specifically for the sector. There are numerous external funds that Ghana can take advantage of to enhance its renewable sector. For example, Ghana has benefited from several grants and programs of the African Development Bank such as the Sustainable Energy Fund for Africa (SEFA), Leveraging Energy Access Finance Framework (LEAF), and the Scaling-Up Renewable Energy Program in Low-Income Countries (SREP) for investment in various aspects of the renewable energy sector. These funds must be applied judiciously towards accessible local financing either through direct government funding or incentivizing local commercial banks to finance renewable energy projects.
• Finally, to increase demand for power from renewable sources, effort must be put into creating public awareness of the need to support the sector as a way of combating climate change and its associated effects. With the combined efforts towards environmental sustainability, it can be expected that there will be increased demand for renewable energy power as a way to reduce carbon emissions. This can already be seen in the growing interest in solar systems for homes, green offices, electric vehicles, and solar-powered streetlights, among others.

Conclusion

The opportunities for renewable energy exploitation in Ghana are endless. For developing countries like Ghana, the transition from conventional energy to green energy will be gradual but must be intentional. To see real impact, the investment climate must support private sector participation if Ghana must meet and possibly exceed its 10% renewable energy mix target by 2030.