Spotlight on Ghanaian Oil & Revenue Management
On July 14th,Oxfam America and the World Bank Institute hosted a round-table discussion with representatives from both organizations as well as from Publish What You Pay (PWYP), Tullow Oil, Baker Hostetler and the International Finance Corporation to discuss the provisions and implications of Ghana’s Petroleum Revenue Management Act (PRIMA). The conversation focused mostly on whether oil contracts have the interest of the Ghanaian people in mind; more than one panelist noted that when citizens benefited from oil revenue there is more public support for these contracts. The representatives welcomed the legislation as a pivotal first step towards careful revenue management and agreed it has yielded successes in the way of access to information, though there is room for improvement.
Concerns were raised by the representatives from Baker Hostetler about a potential “resource curse” and quiescent corruption in what some consider a West African democratic state with great potential.
Some countries in Africa, such as Nigeria and Angola, suffer the “resource curse:” the theory that widespread poverty and violence follow the abundance of oil profits. Such counterintuitive underdevelopment is thought to be the result of resources leaving the country, revenue mismanagement and new infrastructure which does not employ local people.
Ghana made its first offshore oil discovery in 2007 at the Jubilee field, about thirty miles off the western coast. Ghana began exporting oil in December, 2010 from the coastal Jubilee oil field and in April, 2011 passed the Petroleum Revenue Management Act. As a country which is new to the production of oil, there has been concern about the overall transparency of the Ghanaian government, but the focus of the discussion at Oxfam America was on the PRIMA.
The PRIMA establishes a “heritage fund” which would essentially store 9% of oil revenues to use either when oil runs out or when the country is in crisis. Citizens are also considered oil revenue shareholders; this manifested itself through country-wide regional forums where Ghanaians voiced opinions on how the oil profits should be spent.
However, Baker Hostetler and PWYP noted there are contradictions within the PRIMA budget. The annual budget is set too low in comparison with rising oil costs which means there is excess revenue not allocated for a specific budget. There is also nothing to prevent revenue from being spent on paying back loans not affiliated with oil production. These nebulous details mean the 70% of oil profits earmarked for paying off debt could in fact encourage borrowing. Ghana’s national debt has already risen by 62% in the last two years.
There are also ambiguous terms such as “interest” or “up-front disclosures” which currently imply government officials are to make disclosure decisions based on subjective interpretations of these rules. Such legal ambiguity can lead to weak application. In this case, citizens might not be able to access the information they have been guaranteed.
Since the initial discovery of the Jubilee oil field, several more reserves have been discovered off the Ghanaian coast. As the oil industry grows, it is crucial that citizens are able to access information. To ensure the PRIMA is implemented in a way which equally distributes the benefits of oil to Ghanaians, the regulations must be clear, concise, and define its terms to the fullest. The people of Ghana need to know where and how their oil revenue is being spent. Oil itself is neither a curse nor a blessing, but with a tool such as transparency the people themselves can influence Ghana’s oil-producing future.