By Efam Dovi
When the oil rigs started pumping crude
off the coast of Ghana’s Western Region in December 2009, many people hoped for
better living standards and development. But some worried that the country did
not have the necessary laws to properly manage the new revenues. They wondered
whether Ghana would be able to break the “curse” that has often marked Africa’s
oil and mining industries: decades of extraction that often saw only a few
getting richer but the majority getting poorer, economic distortions caused by
improperly managed resource wealth and hardly any money set aside for times
when commodity prices dip or the wells dry up.
For Ghana, examples of such problems
are very close to home. Nigeria, its West African neighbour — and the
continent’s largest crude producer — saw successive governments deplete the
estimated $400bn earned from crude oil sales since the 1970s. Besides, Ghana’s
own record in managing mineral revenues after a hundred years of gold mining was
not the best.
But it seems that a new dawn has
broken. Steve Manteaw of the Civil Society Platform on Oil and Gas — a
coalition of civil society groups that promotes transparent and accountable
management of oil and mineral wealth — said “Ghana is on the right path because
it has in place a law that governs how the oil revenue is collected and
managed.”
Experts have described Ghana’s Revenue
Management Act — passed more than a year after the first oil was pumped from
the country’s Jubilee Field — as an ‘innovation.’ The law outlines clear
mechanisms for collecting and distributing petroleum revenue. It specifies what
percentage should help fund the annual budget, what should be set aside for
future generations and what should be invested for a rainy day.
Petroleum revenue contributed four per
cent of the government’s total capital spending in 2011. The funds went mainly
to investments in road infrastructure, but also to building the capacity of the
oil and gas sector, repaying loans and strengthening agriculture, most notably
for fertiliser subsidies.
In devising its law, Ghana borrowed
from best practices in Norway, Timor-Leste and Trinidad and Tobago, which have
developed laws to better govern oil and gas exploration and production, and to
manage the revenues.
Rarely are citizens’ groups given a
chance to oversee how natural resource revenue is managed in Africa. That is
why experts have hailed the creation of Ghana’s Public Interest and
Accountability Committee under the provisions of the petroleum revenue law.
Civil society groups lobbied vigorously for the 13-member committee. With
membership drawn from organised professional bodies, think tanks, pressure
groups and traditional institutions, among others, the body serves as a
platform for public debate on how petroleum revenues are spent.
The PIAC also monitors and evaluates
compliance with the law by the government and other institutions, provides an
independent assessment of petroleum production and receipts, and publishes its
findings in half-year and annual reports.
A report issued in May 2012 covering
oil production in 2011 found that its revenues provided the government with
considerable fiscal relief, thereby enabling it to shift more funds into
development programmes. But it also noted that the government did not fully
comply with all the law’s provisions. The Revenue Watch Institute commented
that the report “sets new standards for accountability.”
The law alone, experts say, does not
solve all the problems. Mr. Kuyole notes that it needs to be backed by
appropriate regulations determining how the government spends its annual
budgetary allocation, among other things.
African governments often lack the
capacity to effectively monitor resource production, and thereby to determine
accurately how much revenue they are owed. Yusupha Crookes, the World Bank’s
Country Director in Ghana, recently said, “A mining fiscal regime is only as
effective as the combined administrative capacity of the government
institutions charged with enforcing it.”
Mr. Crookes argued that “it is
important to have systems and processes in place to effectively address oil,
gas and mining tax payments administration,” since “the general tax system may
not be efficient enough for the extractive sector.”
Mr. Emmanuel Kuyole of the Revenue
Watch Institute agrees. In Ghana’s case, he stresses the need to put in place
all the various committees provided for by the law, and to strengthen
institutions like the Petroleum Commission and the unit of the Ghana Revenue
Authority involved in monitoring production and the determination of revenue.
Ghana may need to look at how revenue
paid by mining companies is determined and at who is calling the shots, says
Kwaku Boa-Amponsem of Boas and Associate, the lead consultant for the Ghana
Extractive Industries Transparency Initiative’s multi-stakeholders group.
Sometimes, all that is needed is to
make the law clearer. In Ghana, complexities under the tax law in computing
mining royalties meant that firms paid the lowest rate for many years. After a
review of the law last year, revenues are now expected to increase
substantially.
Across Africa, new oil fields are being
discovered. Chad, Côte d’Ivoire, Liberia and Mauritania have all discovered oil
in commercial quantities. And in the last couple of years, new discoveries have
been made in Angola, Cameroon, Gabon, Niger and Sierra Leone, while extensive
exploration is ongoing in a number of others. East African neighbours Kenya and
Uganda are poised to become major oil producers in the near future.
Dr. Manteaw of the Civil Society
Platform on Oil and Gas thinks there are lessons for Ghana and for African
oil-producing countries more generally. “Where countries have effectively used
natural resources to transform their economies and the lives of their people,”
he points out, “the countries themselves have been active participants in the
sector and work towards ownership by buying shares in the producer firms or
reinvesting the revenue and living off the dividends, like Botswana.”
Professor Paul Collier, director of the
International Growth Centre, a UK research institute, expressed similar views
during a recent visit to Liberia. He said that the discovery of oil there could
either end poverty or increase it, depending on which road Liberians follow:
“If you find yourself at the crossroads, it’s your determination that can lead
you to the case of Botswana or Ghana and not other worse oil scenarios in the
world.”
After decades of oil production and
billions of dollars in revenue unaccounted for, Nigerians are hoping that the
country’s new Sovereign Wealth Fund — if managed well — will improve living
standards. Angola, Africa’s second largest oil producer, is also considering
setting up such a fund.
•Dovi is a New York-based Ghanaian
journalist.
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