Ghana's 2010 oil 'boom': Ensuring public interest over private gain
2010-02-25, Issue 471
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Ghana is on the precipice of an oil 'boom'. The nation’s anticipated oil production begins this year, 2010. And along with the production, the public’s high expectations from oil wealth, in addition to the potential threats that come with this oil 'boom'. Even as we remain optimistic, we should not underestimate the potential dangers of our new circumstances to our democracy, national unity and our nation’s socio-political security. There sure are no greater exigencies now than laying strong foundations for transparency and accountability, both in the preparatory stage and the eventual management of our oil wealth.
Disputes related to natural resources have exacted a toll on far too many African societies, turning the dreams of national prosperity that come with the discovery of such natural resources into perpetual nightmares. Consequently, these disputes have resulted in violent conflicts, environmental destruction, corruption, untold human hardship, displacements and a devastated future for entire communities. This sad but true reality causes even the most exuberant optimist to wonder if the discovery of oil in one’s country should be a cause of jubilation or trepidation. I am cautiously optimistic about Ghana, that the nation will take full advantage of the positive and negative lessons from others to ensure transparency and accountability as oil production begins.
This article is a contribution to Ghana’s determination to ensure a peaceful, productive and prosperous oil era. It outlines specific critical statutory, institutional, social and community strategies for ensuring transparency and accountability in the management of Ghana’s oil.
The reality of oil in Africa today
Aside from a few exceptions, wherever there is oil on the continent, there is misery and conflict. The causes of these conflicts, as seen across the region, range from a lack of mechanisms for accountability, inequities in the distribution of oil wealth, to injustices of endemic political and corporate abuses of human rights in affected communities. This is manifested through the violations of rights, total disregard for laws and flagrant disregard for the interests and wellbeing of communities.
A common trend as seen in oil-related conflicts from Angola and Nigeria to Sudan, among others, is the emergence of aggrieved and exploited groups of citizens, who resort to violence as the only means of demanding accountability, inclusion and justice. 'A riot is the language of the unheard', as Martin Luther King put it. The billions of oil wealth generated do not reflect in the conditions of the people and the communities from which the oil is drilled. The continent's leading oil producers – Algeria, Nigeria and Angola[i] – rank 104, 158 and 143 respectively on the 2009 United Nations Human Development Index. Other resource-endowed African countries like the Democratic Republic of Congo (DRC) also rank near the bottom of human development in the world.
The absence of strong mechanisms for accountability and oversight have allowed small cliques of greedy elites and their corporate allies to amass the oil wealth to the detriment of national development in too many of our countries. It is a trend too pervasive across the continent, but Ghana can and must do things differently.
Outlook of Ghana’s extractive sector
Until its independence in 1957, Ghana was called the 'Gold Coast' for its rich endowment in gold. In addition, Ghana is blessed with bauxite, aluminium, manganese ore and diamonds. Today Ghana is the 2nd and 10th leading gold producing country in Africa and the world respectively[ii], bringing in export earnings of US$1,277.2 million in 2006 and US$1,733.78 million in 2007, according to the 2008 official budget statement. Heretofore, the several decades of management of Ghana’s mining resources has been characterised by very little transparency and accountability, a characterisation that should not be repeated with the management of oil resources. There’s never been any serious public discourse, oversight or curiosity about where the revenues from the millions of ounces of gold produced so far end up. Consequently, the interest of foreign multinationals and a few local elites have dominated and controlled the management and wealth from the sector.
The 2007 discovery of oil reserves and the anticipated production estimates of up to 150,000 barrels per day[iii] is likely to change Ghana’s economic outlook. Oil will topple the mining sector as Ghana’s foreign exchange earner.[iv]
The significance of the expected impact on both the country’s economic outlook and on the communities and livelihoods of citizens demands a more responsible management than we have seen with mining in Ghana and in oil production in other African countries. The government of Ghana and the other stakeholders have indicated their laudable intentions for the effective and equitable management of the oil and the oil wealth, as citizens continue to outline their expectations and aspirations towards this wealth. Transparency mechanisms and tools, citizenry awareness and political will are important ingredients needed for the fulfilment and realisation of the commitments and aspirations.
The choices we make and the mechanisms we put in place at this critical stage, will shape the economic and security conditions of our country in far more ways than we can imagine.
We have woefully failed some of the initial tests, particularly with the initial negotiations and allocation of shares and contracts. Many critical details on contracts, investments and government plans remain unavailable to the citizenry. Other critical decisions and commitments have been made behind closed doors with alleged suspicious 'sweat equity' deals for some politicians and their allies. The Financial Times on 7 January 2010 reported on an ongoing investigation by Ghanaian and US authorities into one of such deals[v] involving key associates of ex-president John Kufuor. The new government has also abrogated a number of contracts for not following due diligence.
The ultimate guarantee for transparency and accountability is the citizens of Ghana – citizenry oversight. We all have a role and a responsibility to help Ghana turn the page on the management of oil in Africa. Citizenry oversight with regulatory and institutional mechanisms for transparency and accountability are prerequisites for safeguarding Ghana’s socio-economic and security interests in the oil era. I wish the intense interest in oil aroused among foreign interests and Ghanaian elites would inspire the same level of interest among the country's citizens.
Why Ghana can and must be different
A number of existing conditions present Ghana with the opportunity to ensure transparency and accountability. Not only do Ghanaians take great pride in being lauded for outstanding democratic and peaceful credentials, they are serious about it. Getting the oil thing right will no doubt boost this international recognition and national pride. Ghana also enjoys a high sense of national unity compared to its regional neighbours. Ghana’s stable and peaceful political environment, democratic space for free press and civil society activism are all important conditions that can help Ghana in this endeavour.
Ghana is fortunate to have a president at this critical moment that is widely regarded as a leader of high integrity. Most Ghanaians including even his fiercest opponents express their confidence in President John Atta Mills’s integrity. As encouraging as this is, it does not guarantee the same level of uprightness from the rest of his team who would be involved in the management of the oil. It also does not guarantee that he will have the political savvy to identify and expel his appointees who indulge in corruption. More importantly, as Barack Obama said in his historic speech in Accra, 'Africa doesn’t need strongmen, it needs strong institutions',[vi] institutions that can prevent and, when it does happen, can detect and redress corruption. Above all, 'we the people' are Ghana’s greatest asset.
Statutory and institutional mechanisms
Two important legislative provisions must be met before oil production begins. The proposed Freedom of Information Act should be passed and must guarantee unconditional public access to information, including on revenues, investments and contracts. Second, our law-makers must upgrade our statutory framework to 21st century standards. Ghana’s situation today is significantly different from what it was when the two major statutes governing the exploration, development and production of petroleum resources in Ghana – the PNDC Law 64 and the Petroleum Exploration and Production Law, PNDC Law 84 – were enacted in 1983 and 1984 respectively. The government has indicated its readiness to strengthen the country’s legal framework. 'It is imperative that Ghana's legal regime relating to the oil and gas industry is reviewed and adapted to Ghana's new condition as a major oil producer', states Ghana’s attorney general.[vii] This commitment must translate into expeditious and deliberate action.
Accountability and disclosures
Our institutional frameworks must ensure accountability from both state and non-state actors in the oil sector. Multinational corporations play a major role and sometimes wield even greater power in the management of these resources and should be adequately checked and monitored. Additionally, there must be institutional mechanisms in place to allow regular disclosure and publication of all agreements and licences, payments, collections and contracts. Furthermore, I would go as far as to recommend an 'anti-kick-back' law that mandates all public officials to disclose any gifts or payments received from any of the stakeholders in the oil sector. 'Kick-backs' are increasingly becoming an acceptable norm in Ghanaian politics. It is a system where public officials knowingly and wilfully expect or accept bribes or indulge in other forms of quid pro quo for favours from certain commercial interests.
Checks and balances
Ensuring genuine accountability and transparency will require a clearly defined system of independent but accountable regulatory, governing and commercial bodies. These bodies should be independent enough to perform their functions without fear or favour but with checks and balances to prevent any functionary body becoming too powerful or isolated.
Institutional capacity development
Government must proactively invest in the capacity development of the relevant institutions and public officials who will be responsible for management, regulatory and revenue functions. We must pursue these efforts with the same level of aggressiveness we see with infrastructural development efforts.
Formal civil society role
Official oversight framework should have a formal role for civil society.
SOCIAL AND COMMUNITY MECHANISMS
The media and civil society actors must foster public engagement and dialogue on all aspects of the process, particularly on environmental impacts, oil revenue management and the defence of the rights of journalists, activists and communities that may be targeted for daring to demand accountability from powerful interests.
Accountability for the wellbeing of host communities
There must be clear mechanisms for protecting the interests and wellbeing of communities – all interest groups and not only the local elite. For example, compensation for farming and fishing communities who may be affected by oil production must be appropriated in ways that cater for the various actors whose livelihoods depend on it and not just the interest of the chiefs and traditional leaders. Additionally, there must be full disclosures on all potential threats resulting from the oil production in these communities. There must be a clearly defined system through which citizens and communities affected by the oil process can channel their concerns and grievances.
Vigilant citizens remain the best guarantee against corruption and for safeguarding the public interest. Citizens and the media must see and treat their monitoring role as a responsibility. Based on the pathetic track record of most of our political and public officials, personal and not public interest is going to be the foremost priority of most of those who would be representing us in the planning, negotiations and decision processes. If 'we the people' don’t stand up for our collective interest, no one else will do it for us.
Alternative and shadow reports
Civil society actors, including think-tanks and citizens groups, should produce regular alternative and shadow reports on key aspects of the oil sector, including environmental and community impacts, oil-wealth management and adherence to human rights and international standards. These shadow reports will offer important perspectives that may be missing from official reports.
Capacity development is required for civil society actors and activists so that their oversight and activism will be constructive, effective and enlightened. Various citizenry constituencies must be sensitised and empowered for effective public oversight of our public and private activities.
Finally, President Atta Mills has the opportunity to leave a legacy of transparency and accountability. After all, the single most important quality that propelled his candidacy to power is his perceived high level of integrity. Such a legacy will not only guarantee him an enviable place among Ghana’s presidents, but will be a vindication of the confidence Ghanaians posed in him. Above all, it will be the right thing to do and Ghana will be better for it. We will need our president’s leadership in this regard but all Ghanaians must share in the responsibility of making 'our oil' the most transparently managed on the continent.
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* Mawuli Dake, a leading African human advocate and strategist, is the CEO of the Africa Group Consult. He is a co-founder of the soon-to-be-launched GhanaOilMonitor.com, a one-stop citizenry platform for fostering greater transparency and accountability in the management of Ghana’s oil resources.
* Please send comments to [email protected] or comment online at Pambazuka News.
[i] US Energy Information Administration- Top World Oil producers, 2008
[ii] Ghana Chamber of Mines- 2009
[iii] Ghana National Petroleum Corporation, The Upstream Petroleum Industry in Ghana
[iv] Official 2008 Ghana Budget statement
[v] ‘Sweat equity’ probe tests Ghana’s oil jackpot' by William Wallis and Martin Arnold. Financial Times, January 7 2010
[vi] US President Barack Obama’s address to the Parliament of Ghana on Saturday July 11, 2009, Accra-Ghana.
[vii] Address by Ghana’s Attorney general and Minister of Justice at All Africa Energy Summit- Dec. 8, 2009.
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