Turning an agency around : lessons from Ghana

NUMBER 89 * ED Preciso Operations Evaluation Department May 1995 Turning an Agency Around: Lessons from Ghana The Bank supported a comprehensive economic mismanagement and project director. Wherever feasible, overhaul of Ghana's power distribution decay, was close to collapsing, work was done under turnkey type utility, the Electricity Corporation of contracts with the suppliers respon- Ghana (ECG), in the mid-1980s. Insti- In 1985, a new government and sible for installation. tution-building achievements during the Bank agreed to pursue the project implementation were none too reform of the power sector as a Financial aspects impressive, but the project began a con- key part of the economic adjust- tinuing institution-building process ment process. Covenants targeted the three ar- that has transformed ECG. While ECG eas most critical to the sector's fi- still has weak points, it is now a much The institutional aspects of this nancial health: tariffs, ECG's grow- better organized, managed, and per- project sought top-to-bottom change ing customer receivables, and its forming institution that is providing in ECG, including organizational re- mounting arrears. But none of the improved service to many more custom- structuring, new management prac- covenants in these areas was com- ers with a much reduced staff. tices and operational procedures, plied with fully or promptly. and improvements in recruitment, Project goals personnel, and training that were ECG's financial situation contin- designed to reduce overstaffing ued to worsen, and new solutions The $49 million Power System and to upgrade skills at all levels, and new targets had to be worked Rehabilitation Project, supported by A twinning arrangement with the out in the context of later projects. a $28 million IDA credit (approved Electricity Supply Board of Ireland This disappointing experience 1985, closed 1991), financed the re- provided assistance for the system partly reflects the depth and habilitation of the power distribu- rehabilitation work and for im- intricacy of the sector's financial tion system of ECG and technical provements in organization, man- problems and partly the lack of assistance for organizational agement, and personnel training, sufficient will to address them- change at the agency. whether on the part of the govern- Strengthening and stabilizing the ment, to keep raising tariffs; of ECG, By the early 1980s, ECG's distri- finances of the sector was at least as to maintain pressure on collections; bution facilities were old and had urgent. Hence the project sought to or of the Bank, to enforce covenants. been poorly maintained for years; establish a rational and systematic its system was overloaded, with basis for tariff adjustment, and to 7 concomitant energy losses and volt- improve ECG's financial manage- Petforniance -udit Report. age reductions, and often equip- ment and performance. Ghana: Power System Rehabilita- ment failures led to power cuts or to ton Project and'Northern Grid rationing. Six previous credits to Physical works were imple- Extenion Proect, Report No. Ghana's power sector had not suc- mented expeditiously by a project 13211. June 1994. OED audits fre ceeded in introducing organiza- unit that was, in effect, a self- available to Bank executive direc- tional reforms in ECG. The agency's governing enclave. The project unit tors and staff from the Internal problems were compounded by was located in its own quarters, had Documents Unit and from wider problems in Ghana's its own staff, and was managed, de Regional Information Center-. economy which, after years of facto, by a consultant serving as Progress has been made since of the company, and long-term Elements of success this project was completed, but tar- programs were begun to resolve iffs, receivables, and arrears re- its organizational, operating, and Desperate circumstances. The main at the heart of Bank's con- staffing problems. agency was clearly in extremis. It cerns about sector finances. The ex- was understood that action was perience emphasizes that utilities After about a year, Ghanaians urgently needed, for the future of are unlikely to achieve the finan- took over leadership responsibili- both the agency and the sector. cial autonomy they need if they are ties, with the consultants returning to operate commercially and be to a largely advisory role. 9 Strong commitment by the govern- free from government interference ment. Ghanian "ownership" was unless a transparent regulatory Reorganization of ECG's over-cen- critically important to the institu- process can replace a political one. tralized and cumbersome structure tion-building effort. The consult- was given early priority. This facili- ants could only function so effec- The project reversed the deterio- tated other reforms. Regionalizing tively because they had the ration in the distribution system responsibility for day-to-day opera- necessary authority, capability, and dramatically improved the tions yielded early benefits. and back-up. quality of service. But it did not permanently reduce the persis- Accounts and financial practices Commitment to proceed with shock tently high losses of power from and procedures also received early therapy. The government's deci- the system. Its initial success in im- attention. The consultant-managers sion to put the consultants in proving the reliability of power introduced new accounting sys- charge supplied a critically needed supply unleashed suppressed de- tems, recruited qualified accoun- initial boost to the institution- mand which soon outran the ca- tants, and provided training in the building effort. It provided ECG pacity of the new facilities. new systems for all concerned staff. with new, competent leaders de- They quickly introduced a new, in- voted to reform in the only way Institutional change dependent audit directorate. this could be done quickly. And to the company's staff and to the The project's institution-build- Staffing. ECG adopted and quite public, it signalled the beginning ing efforts succeeded in the area of closely adhered to a staff reduction of a new order. utility management. They pro- program with annual targets. By ceeded in three phases: 1990, ECG's work force was down Ample technical assistance, effec- to 3,106 from 4,648 in 1986. tively channeled. Technical assis- * At first it was proposed to tance played a critical role in merge ECG into the Volta River Skills. The agency upgraded its this project. It deserves much of Authority (VRA), the autonomous skills through intensified recruiting the credit for organizational re- and well managed generation and overhauling and expanding its structuring, financial manage- and transmission agency. But training program. ment, reduction of overstaffing, with strong opposition from and training. the two agencies, this proposal Management of commercial opera- was dropped. tions. ECG installed many new High calibre of new staff. New- meters. It took measures to super- comers brought ECG greater * Then the government took vise meter readers better, to expe- skills, a commitment to reforms, drastic action. It dismissed ECG's dite billing and increase its accu- and better morale. ECG's image top management and put the con- racy, and to collect amounts owed changed from that of a dying or- sultants in charge until Ghanaian by consumers. Yet progress was ganization to one that was on the replacements were available. It painfully slow and ECG still has a way back, offering attractive op- appointed a strong board of direc- long way to go. A management portunities. Today, ECG's manag- tors-ECG's first-to oversee and contract established in 1994, and ers report they have no difficulty work with the consultants. During the annual increases in electricity attracting well-qualified recruits this period, order was restored tariffs since 1992, will help ECG to in all areas, with the possible to the day-to-day management improve its commercial operations. exception of finance. OED Prpcis is produced by the Operations Evaluation Department of the World Bank to help disseminate recent evaluation findings to development professionals within and outside the World Bank. The views here are those of the Operations Evaluation staff and should not be attributed to the World Bank or its affiliated organizations. Please address comments and enquiries to the managing editor, Rachel Weaving, G-7137, World Bank, telephone 473-1719. Internet: rweaving@worldbank.org May 1995