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Opinions of Thursday, 5 November 2009

Columnist: Yeboah, Stephen

Leaving a legacy of Transparency in Ghana’s Oil and Gas Industry

“If we hadn’t discovered oil, we would have been better off today. Once we had oil, our agriculture sector collapsed. Oil has made us lazy….We have become corrupted” – Former Minister of State for Finance in Nigeria, Mrs. Nedadi Usman (Credit - Jonathan Power: The perils of African oil, 2004)

The increasing awareness of the “Resource Curse” of late has sparked unprecedented debates about how accurate is the relationship between extractive industries and poverty. The relationship has ostensibly been proven considering the high levels of abject poverty in resource-rich countries especially in developing countries. What would Ghana’s historic ‘moments’ of June, 2007 when oil was discovered in commercial quantities stand to mean? Would the country in the near future curse this day for its associated calamities? Ghana, indeed, has a lot to prove if something beneficial is to come out of the imminent oil and gas production. It is an undisputable fact that in the circles of oil and gas exploration, there is little evidence that past oil exports and petrodollars have made enormous contribution to the welfare of developing countries. In Nigeria, 40 years of petroleum exports (about $340 billion earned) have not helped raise standards of living but rather exacerbated conflicts; Gabon, sub-Saharan Africa’s fourth biggest oil producer and the world’s third biggest provider of manganese still has an estimated population of 1.5 million living below the poverty line. Chad is no exception in this regard.

Obviously, this means that Ghana needs to proactively consider certain basic issues because the logic behind these calamities in other resource-rich countries is easy to understand. The country should not be obsessed with the notion of ‘fairly distributing oil revenues to all Ghanaians’ when the framework to ensure the equitable oil revenue distribution does not exist. It is interesting to know that the major issues behind the failures of resource-rich developing countries all boil down to “corruption”. If corruption is the yardstick to be used to assess the severity of “Resource Curse”, then definitely Ghana is not so exceptional to elude the grips of the “Devil’s Excrement”. It is against the backdrop of the upsurge of corruption in resource-rich countries especially in the developing world, that the Extractive Industries Transparency Initiative (EITI) was launched in September 2002 to encourage oil and gas companies to publish the payments they make to the governments of countries in which they operate.

This article, therefore, seeks to draw the attention of Ghanaians, civil society groups and the Government to the spell of “corruption” that has beclouded the benefits of oil and gas explorations by drawing lessons from other African countries, our close allies. Again, to devise measures that can be put in place to nip this canker in the bud. So, the sixty-four thousand dollar question still remains ‘can Ghana leave a legacy of transparency for petrodollars to be an economic salvation?’

Seeking for pertinent lessons

According to Chadian President Idriss Déby in a statement to commemorate the inauguration of the Chad-Cameroon pipeline in October 10, 2003, “The development of the crude oil will benefit the entire Chadian nation”. The statement made by the president evoked the belief that Chad would completely break the chain of history which paints a grim picture of what is likely to accompany rapid growth in petroleum production. With exactly a year or two, decisions taken by the president proved rather the opposite of what he said. During 2003 and 2004, President Déby had reshuffled the cabinet at least three times, placing family relatives and members of his Zaghawa ethnic group in key positions of power and sidelined rivals or sources of internal opposition prior to the next national elections in 2006 (Ian Gary and Nikki Reisch, Chad’s Oil: Miracle or Mirage?, February 2005). This started the whole show of economic spoliation in little Chad. Again, in February 2004, President Déby appointed his brother-in-law, Idriss Ahmed Idriss, to become the National Director of BEAC, Banque des États de l’Afrique Centrale, the regional bank of Chad and by virtue of that position, Idriss became a member of the joint government-civil society committee responsible for overseeing oil revenue expenditure (Ian Gary and Nikki Reisch, Chad’s Oil: Miracle or Mirage?, February 2005). To that end, the premeditated strategies of the president made oil mismanagement very obvious. The presence of Idriss Ahmed Idriss, as a member of the Collège (a joint government-civil society body whose task is to “verify”, “authorize” and “oversee” expenditure of oil revenues), inadvertently made manipulations for personal gains easy.

Transparency International's Corruption Perceptions Index for 2005 named Chad as the most corrupt country in the world and in 2007, it scored 1.8 out of 10 on the Corruption Perceptions Index (with 10 being the least corrupt). In the 2008 Corruption Perception Index, Chad secured 173rd position of the last 180th position with a score of 1.6 out of 10. It is, therefore, not surprising that Chad, according to the United Nations 2008 Human Development Index as stated in the 2009 Human Development Report, is among the poorest countries of the world ranking 175th position of 182 countries (with a score of 0.392).

According to the World Bank, poverty in Chad is widespread and social indicators are well below the average for sub-Saharan Africa. The incidence of poverty (defined as the proportion of households with annual spending below what is necessary to meet minimal needs) is estimated at 56% according to a 2003 household survey; an estimated four-fifths of the population of about 8.8 million are still living on less than a dollar a day.

In furtherance of the argument for transparency, a US Senate report in 2004 found that Riggs Bank helped top officials of Equatorial Guinea steal hundreds of millions of dollars in oil revenues. It is recorded that Equatorial Guinea government leaders siphon oil revenues to account set up for them in Washington. It is worth noting that Equatorial Guinea despite its economic windfall from oil production has made few improvements in the population’s living standard. According to the World Bank, oil revenues increased dramatically in value from US$3 million in 1993 to US$190 million in 2000 and US$3.3 billion in 2006 and yet the boom has not been translated into positive human development outcomes, which remain poor. Equatorial Guinea, according to the 2008 Corruption Perception Index, ranks 171st position with a score of 1.7 out of 10, just a point above Chad. It is of no wonder that the country ranks 118th position (with a score of 0.719) of the 182 countries of the United Nations 2008 Human Development Index, which is indeed nothing to write home about. Comparatively, Ghana, an agrarian economy with HDI of 152 (scoring 0.526) performs better than oil-rich Chad and that Ghana is in the medium human development category of the HDI with Equatorial Guinea.

The burning question remains, is Ghana fit and ready to avoid these tragedies? A legacy of transparency

Though Ghana is a ‘candidate’ of the EITI and as such published reports which cover payments and revenues in the mining industry in 2004 and 2005, the essence of transparency has practically been a mocking mirage. This is evidenced in the transparency initiative in the mining industry that has comprehensively been inadequate and asymmetrical simply because some invisible hands are in secrecy siphoning mineral revenues that accrue to the country especially with royalties. The “Paradox of Plenty” continues to assume sophisticated heights and from bad to worse is the grim picture that has clouded the equitable distribution of revenues in the mining industry. What becomes of the fate of a country that cannot even curtail the growing misfortunes of spoliation in the mining industry?

Ghana should rise up and place high priorities on the working principles of the EITI in avoiding similar fate in the country. The EITI has come at such an opportune moment for the country, we need to pay attention to every detail of the Ghana Extractive Industries Transparency Initiative (GHEITI) and be made to cover other sectors of the economy.

A major step towards ensuring the optimum benefits of oil is the commitment to enact into law the Freedom of Information Bill which is a major foothold for transparency. This will go a long way to guarantee the ‘Right to Information’ in Article 21 (1) (f) which states that “All persons shall have the right to information subject to such qualifications and laws as are necessary in democratic society”. In addition, the formation of a committee on revenue management made up of government and civil society groups would serve practical expediency with respect to strategic revenue investment and poverty reduction. However, the formation of committee on oil revenue management and creating oil fund alone appears not too strong to break the shackles of the “Resource Curse” and ensure equitable distribution of oil dollars looking at the case in Chad. The Collège, which is a joint government-civil society body whose task is to “verify”, “authorize” and “oversee” expenditure of oil revenues has simply been manipulated by President Idriss Déby with appointment of his brother-in-law. The prudent strategy lies in strong, vigilant and enlightened civil society groups to spearhead the working of the principles of “Publish What You Pay” as well as unrestrained efforts towards ensuring checks and balances. The push for oil revenue management and transparency would serve to unmask the hidden benefits of the petroleum sector to boost the economy.

By virtue of the fact that secrecy fuels suspicion and in turn breeds enmity, transparency in the country should go far beyond the monitoring of the flow of oil revenues to all contracts signed between the extractive companies and the government.

According to the book “Eye on EITI” (April, 2008) by Publish What You Pay and Revenue Watch Institute, progress made so far by Ghana in EITI includes having appointed a leader, established a multi-stakeholder committee, and drafted and approved a work plan. It is a promising step and when this is replicated with unwavering commitment in the oil and gas industry, definitely Ghana will set the record straight again in Africa and the world at large. Giving credence to the EITI principles and aiming to attain a ‘compliant’ status, as Liberia has recently earned, means that there would be very little to worry about in the oil and gas sector. It is all about the political will of the government to extend, as a matter of urgency, the working principles of EITI to cover the petroleum sector while engaging civil society participation and holding onto good governance.

Conclusion

In all, it is striking to know that “Resource Curse” is not a mythology or a poem and that its true manifestations are disastrous to the progress of an economy. The disparaging effect of “Resource Curse” should, therefore, never be underestimated. We need a change in the right direction. The ‘Talk No Action’ syndrome wouldn’t help the country in any way. Let us be proactive than reactive to critical issues in the petroleum sector.

The author, Stephen Yeboah is at the Department of Planning, Kwame Nkrumah University of Science and Technology, Kumasi-Ghana. (Email: stephenyeboah110@yahoo.com)

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