Ghana's Teshie Nungua desalination plant, designed to produce 60,000 cubic meters of potable water daily, has been shut down. The plant was meant to alleviate water stress in parts of Accra. Instead, it has become a financial burden, with Ghana facing enormous arbitration awards. The plant's failure has been attributed to an unsustainable business model.
The business model involved Ghana Water buying desalinated water at GH¢6.75 per cubic meter and selling it at GH¢1.47. This model was unsustainable, as it resulted in significant losses. In contrast, commercial tanker water in Accra costs between GH¢90 and GH¢110 per cubic meter. This highlights the existence of a market for reliable water.
A better structure for the desalination plant would have separated production, transmission, and retail. The desalination company would produce the water, while a private commercial operator would sell it. Ghana Water would provide transmission and distribution infrastructure and earn a regulated toll. Companies like Kasapreko or Accra Brewery could handle the retail side through a dedicated subsidiary or consortium.
These companies have the commercial capabilities to handle distribution, customer segmentation, billing, credit control, collection, and route to market. They could start by targeting customers already paying heavily for reliable water, such as hotels, factories, and hospitals. There is considerable commercial space between GH¢6.75 and GH¢90 that could be explored.
Desalinated water could have been profitably sold to selected customers at GH¢20, GH¢30, or GH¢40 per cubic meter. Ghana Water would collect a transmission charge. This approach would protect affordable basic water while allowing for the sale of more expensive desalinated water to customers willing to pay for guaranteed supply.
The government's decision to make Ghana Water the commercial buyer has been questioned. This structure led to the current situation, where the plant produces nothing, consumers buy expensive tanker water, and Ghana faces approximately US$235 million in awards. The Atlantic Ocean did not fail Ghana; the business model did.
The failure of the Teshie desalination plant highlights the need for a revised approach to water production and distribution in Ghana. The government and private sector must work together to find a solution that addresses the country's water needs while ensuring financial sustainability.
Key points
- The Teshie desalination plant has become a liability of US$235 million due to an unsustainable business model.
- A revised approach to water production and distribution is needed to address Ghana's water needs.
- Companies like Kasapreko or Accra Brewery could handle the retail side of the desalination plant.
