ECG, COCOBOD, GNPC named as SOEs with the largest liabilities

The Electricity Company of Ghana (ECG), the Ghana Cocoa Board (COCOBOD), and the Ghana National Petroleum Corporation (GNPC) have been named as the three State-Owned Enterprises (SOEs) with the largest liabilities totaling some GH¢28,583.63 million.

The three institutions placed first, second and third respectively on the league of the SOEs with the largest Liabilities (FY2020), as captured in the 2020 State Ownership Report published by the Ministry of Finance.

These three (3) entities collectively accounted for 40.86 percent of total Liabilities in the SOE sector at the end of 2020.

The three institutions are of strategic importance to the country’s ability to sustain power supply to domestic and industrial users, the ability to sustain and improve the livelihood of over 850,000 cocoa farmer households in Ghana, and the sustenance of the government’s free high school policy using oil funds.

The ECG ranks first as the SOE with the largest liability of GH¢ 13,796.38 million. This represents an increase of 25.88 percent (GH¢4,578.84 million) on the corresponding figure for 2019 of GH¢17,689.93 million.

The electricity distributor’s total liability has increased by an average annual rate of 26.02 percent between 2016 and 2020.

The company’s current liabilities, driven largely by short-term borrowing and an increase in trade and other payables, constitute 73.79 percent of ECG’s total liabilities for 2020.

Short-term borrowings at the end of 2020 include credit facilities and loans secured from international and local financial institutions such as the International Development Association (IDA), KFW, AfDB, MoF Special Loan, GCB Bank Limited, Fidelity Bank, UMB, and First Atlantic Bank Ghana Limited.

“It is clear the rising current liabilities are linked to the declining capacity of ECG to service its financial obligations as and when they fall due. This is evidenced by the accumulation of arrears by ECG during the period,” the 2020 State Ownership Report noted.

ECG’s financial position puts a strain on the finances of power producers who sell directly to ECG and the main power transmission company-GRIDCO.

On the part of COCOBOD, the report notes that the cocoa industry regulator is not very liquid.

COCOBOD’s liquidity ratio of 0.82 and 0.75 in 2020 and 2019 respectively, is an indication that the company may have difficulty in servicing its short-term obligations as they fall due.

“Free cash-flow: Free cash flow position of COCOBOD was negative GH¢115.14 million in FY2020 compared to GH¢496.52 million in FY2020,” the report noted.

The GNPC’s total liabilities have increased from GH¢1,775.81 million in 2016 to GH¢11,350.96 million in 2020.

The report notes that GNPC recorded the biggest Net Loss of GH¢1,618.82 million among energy SOEs in the year under review.