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Opinions of Wednesday, 23 December 2009

Columnist: Aapengnuo, Clement

Ghana Pledges Open Accounting as it prepares for oil revenue

Oped: Ghana Pledges Open Accounting as it prepares for oil revenue.

The decision of the Government of Ghana to publicly disclose all present and future contracts with oil companies is highly commendable. This plan for increased transparency and public oversight at the dawn of the new oil windfalls if carried out will distinguish Ghana from other oil rich countries beseeched with massive government corruption, violent conflicts and widespread poverty. Ghana’s next-door neighbor, Nigeria is a good example of poor management of oil revenues because of lack of transparency. The discovery of the Jubilee Field, an offshore oil reserve estimated at between 600 million and one billion barrels has driven the country into an "oil fever."

Ghana has a reputation as a peaceful, stable and democratic state in the West African sub-region with a history of successful democratic elections and sound economic development. Many in the international community strongly believe that Ghana may be in a better position than Nigeria and other African neighbors to turn its newfound oil wealth into lasting prosperity. However, beneath this international recognition, there are more than 200 internal conflicts around traditional authority (Chieftaincy), land and politics. In the northern part of the country, these conflicts take on ethnic dimensions. These conflicts have left communities polarized by grief, hatred, and mutual mistrust leading to a cycle of violence and revenge. Ghana’s competitive multiparty political environment has also created a fertile ground for the politicization of these conflicts, further deepening the divide in communities. There are growing concerns about the impact of these conflicts on national and sub- regional security and stability. Their impact is most felt in the area of economic growth and development.

Studies have revealed that oil rich countries tend to be less transparent with no channels for public accountability. According to the New York based Revenue Watch Institute, the lack of budget transparency in oil dependant countries can lead to poor management of resource wealth affecting in very significant ways development over the medium to long term. It also contributes to widespread corruption, human rights abuses, and reduces investor confidence. Ghana has a lot of examples of the menace of oil wealth in Nigerian, Sudan and Guinea Bissau. In our world of global business, a countries well-being is very much dependant on investor confidence.

The decision of the president of Ghana to ensure that every Ghanaian benefits from the oil windfall by ensuring a transparent accounting system is commendable, however, it is not enough to be transparent about how drilling contracts are allocated. What is more important is budget transparency, accountability and revenue management systems because, the magnitude of revenue that will be flowing into the national budget from oil will be so high that if careful budgeting is not done, the resources will not be properly channelled towards broad- based development and sustainable economic growth. Any uneven distribution of development projects can lead to ethnic conflicts.

There are a number of steps the government has to take in preparation for the oil wealth. First, government must avoid grandiose and ad hoc spending because funds are available and focus on projects that will diversify the revenue base of the economy in the event the wells run dry someday. There is the need for an effective public and legislative oversight of the collecting and spending of the revenues, an open budget system which allows for public discussion of policy options, for development and economic growth.

Secondly, government must put in place a special committee of experts that is politically and regionally balanced to identify potential revenue generating projects and also regionally based projects that take into account the potential of each region. These projects should be openly discussed to generate a consensus before the funds starts flowing. A legislative instrument must also guarantee that a change of government does not change the development plans.

Thirdly government must embark on a serious campaign emphasizing that the oil revenues are a blessing to all Ghanaians and not a particular region or tribe.

Clement Aapengnuo

Conflict Analyst

Institute for Conflict Analysis and Resolution

George Mason University VA.

caapengn@gmu.edu