“Congress’ action is a big victory for the United States, for the citizens of every country with mining or oil or gas production, and for investors and people who recognize that financial transparency is essential for government and corporate accountability. The U.S. has raised the global standard for financial transparency for governments worldwide and for the oil, gas and mining industries,” - George Soros, Chairman of Soros Fund Management, LLC and founder of The Open Society Institute.

The mounting calls for transparency and openness in the mining and oil and gas sectors have witnessed groundbreaking reforms with the passage of the new financial transparency law by US Congress making disclosure of payments from oil and mining companies to governments around the world a legal requirement. Perhaps the most innovative and most talked-about aspect of the global fight against the resource curse is setting the stage for transparency. This really informed the passage of the new law by Congress as part of the provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act (also known as Financial Reform Act).
With this step being lauded by civil society organizations and individuals, Congress voted to require companies registered with the Securities and Exchange Commission (SEC) to publicly report how much they pay governments for access to their oil, gas and minerals. The language included in this financial services reform measure was based on the Energy Security through Transparency Act (S. 1700), a bipartisan Senate bill introduced in September, 2009 by Senators Richard Lugar (Indiana Republican) and Benjamin Cardin (Maryland Democrat).
The new law creates a low-cost, uniform transparency method for oil, gas, and mining companies registered with the US Securities and Exchange Commission (SEC) and covers more than 90 percent of internationally operating oil companies and many of the top international mining companies. Companies will be required to publicly disclose payments for the extraction of oil, gas, and minerals on a country-by-country and project basis as part of financial statements that are already required by the SEC. This not only includes American companies but also many foreign companies, such as Shell and BP, as well as companies from emerging markets such as China, India, Brazil, and Russia (Oxfam America). This disclosure will have a big impact in developing countries where secrecy is the norm. For example, in Equatorial Guinea all the major oil and gas producers in the country will now be required to disclose payments to the government of Equatorial Guinea.
It is important to know that this new historic twist in the provisions to ensure transparency sets up an international standard for public disclosure of natural resource revenue information that goes beyond the borders of the United States or developed countries. Ghana’s extractive industry is no exception to this change in paradigm.
With the unwavering commitment of Ghana and many resource-rich countries in developing countries in confidentiality clauses in contracts, what would be the effect of this legislation to activities in mining and oil and gas industries? Would this change of event mean anything to the economy of Ghana? Would government ever be ready to adhere to the implementation of this reform? Addressing these questions would reveal whether or not Ghana is ready to reverse the perverse phenomenon of the resource curse.
IN PURSUIT OF THE BEST
“This provision is a critical part of the increased transparency and corporate responsibility that we are striving to achieve in the financial industry. Given the catastrophic events in the Gulf of Mexico, oil companies, in particular, should well understand that secrecy fosters instability, corruption and greater risk,” - Senator Benjamin Cardin.
From the mining industry and to the emerging oil and gas industry, Ghana has attached so much sacredness to contracts signed with multinational mining and oil companies on behalf of the people with an unjustified case of protecting commercially sensitive information. This has not only leveraged undue advantages to these companies but has brought in its wake intractable development challenges evident in increased poverty, hunger and environmental damages in producing regions even with rising prices of gold in the international market. Worst of it has been the threats to national security when local people feel cheated and exploited in their own legitimate land. Political leaders with their perceived gamut of ideas, mercilessly accept as professional the dishonourable acts of lining their pockets with the peoples money for their personal aggrandizement.
It is in the light of these evil deeds, that the call to transparency has been deemed a necessary intervention to let extractive industry revenues trickle down to their deserved benefits. This measure of financial transparency in the oil, gas and mining industry would help reduce corruption, mismanagement, and conflict that are known to be associated with natural resource extraction booms.
In Ghana, there is no doubt that the mining sector has enjoyed longevity of secrecy in terms of contract details and streams of revenues. And this formality is bound to be followed and repeated in the nascent oil and gas sector. The question to pose is should Ghana care that this financial transparency reform in the US now mandates companies by law to report on what they get and what they pay out to host governments? There is a reason to care since the country would have no option than to oblige these sweeping changes that brings enormous benefit to the ordinary poor.
The US Securities and Exchange Commission (SEC)- the primary overseer and regulator of US securities market- is known to cover more than 90 percent of internationally operating oil companies and many of the top international mining companies. Definitely, many mining, oil and gas companies that operate within the borders of the country are registered with SEC. For example, Anadarko is registered with the SEC, along with Newmont Mining, Anglo-Gold Ashanti, Gold Fields Ghana, Goldenstar Resources and others. If the Kosmos share in the Jubilee field is sold to Exxon, Exxon will be covered by the legislation. (Since Kosmos Energy is privately held, it is not covered and Tullow is listed on the London Stock Exchange and not listed in the US. Both companies, though, have to disclose payments as a requirement of World Bank financing received last year). This makes the whole issue very dramatic and fascinating.
Indeed, this foundation has been laid in an era that is ripe for far-reaching reforms. The time is now that the local people know what companies pay to governments and what governments receive and spends.
THE THORNY ISSUE
"Congress has made an unprecedented commitment to financial transparency and good governance in a sector that not only affects American wallets, but also some of the most vulnerable communities around the world" - Raymond C. Offenheiser, President of Oxfam America.
The concept of disclosure of revenues and other details or terms of contracts demands mutual agreement between the governments and concerned companies. Whether or not companies would be better placed to disclose revenues without the consent of the host government is worthy of consideration. There are numerous cases where host governments have resisted the willingness by companies to disclose revenues for public consumption. In response to the growing demands by NGOs for transparency in Angola, BP was the first ever company to formally agree to voluntarily disclose payments. However, this commitment in 2001 backfired on BP when the state oil company of Angola threatened to revoke BP’s operating license.
The regulation as witnessed in the US, of listed companies on SEC could override confidentiality clauses in contracts, which companies argue have been preventing them from disclosing payments. Most contracts allow companies to opt out if required to do so by home government regulators, such as the SEC.
In this regard, there are going to be new twists to the operations of mining, oil and gas companies in the country. There are definitely direct effects of this financial transparency resolution to Ghana’s extractive industry. Apart from the fact that revenue reporting of multinational companies is going to be scrutinized, the responsibilities of government as regards prudent spending of revenues would witness exceptional transformation. The local people would be better placed to hold government to account and assert and enforce laws to ensure that their fundamental rights are not stolen from them. An economy with well informed citizens has always been a prerequisite to prudent revenue management. There is no need fixing confidentiality clauses in the Ghana Petroleum Revenue Management Bill, contracts and other provisions when local efforts has been given this decisive foothold.
What remains significant is that companies ought to heed this call for financial transparency so that Ghanaians can begin to use appropriate and relevant information to hold government accountable for using revenues. It is about time Ghana took a hard look at herself to understand the true importance of extractive industry revenues in spurring growth and combating poverty. Revenues that accrue to the state should help address essential services like healthcare, education, job creation if we are serious about achieving the targets of the Millennium Development Goals by 2015.
The legislation is also bound to bring to Ghana responsible corporate investments and trading practices that would enhance business operations for optimum gain.
CONCLUSION
The legislation by Congress to require companies to publicly report revenues they receive and pay to host governments complements the Extractive Industries Transparency Initiative (EITI) which is fast becoming the global standard for transparency in natural resource extraction. With the SEC having 270 days now to develop strong regulations to keep companies to this law, companies operating in Ghana should help implement this reform and not try to water down the law through the SEC rules-making process. In essence, transparency should be seen as a precondition to poverty alleviation, and a corruption-free state. This is such an opportune moment for the country’s emerging oil and gas sector and we should not miss the point. Ghana ought to make amends in the mining sector that has been guilty of gross insecurity, extreme poverty, environmental damages and abuse of fundamental human rights. The new tool for public oversight has been handed down to impress on the right standards in the country’s extractive industry.
I want to use this platform to commend the efforts of able bodies and groups that has relentlessly fought for this transformation in the arena of transparency including Revenue Watch Institute, Open Society Institute, Oxfam America, Publish What You Pay and other faith-based, anti-poverty and human rights organizations. Indeed, global poverty is the concern of not only developing countries but that of the developed nations. The meaning of this reform is sweeping benefits that Ghana would get in the pursuit of her agenda in the oil industry.

The author, Stephen Yeboah is a freelance writer and the National Co-ordinator for Osagyefo Network for Rural Development (OSNERD), an NGO based in Kumasi [email: stephenyeboah110@yahoo.com]

*Special thanks to Mr. Ian Gary, Senior Policy Advisor on Extractive Industries, Oxfam America for the comprehensive editing of this article and conceiving the idea.