Special topics
Ghana, like many other African countries, is blessed enormously with vast natural resources capable of transforming its economy. This not withstanding however, decades of exploitation of these resources have had no significant impact on the country due largely to poor state management and intensive piping of these resource revenues offshore by multinational companies. The extensive environmental impacts coupled with poverty in most mining communities in the country exemplify the footnotes left behind by years of Gold mining, for example.
By Ofori Jerome, Msc. Natural Resources Management, NTNU
The resolve by civil society organisations and the people in general to maximise benefits from the newly found petroleum resources is positive and encouraging. This article, thus, provides some few useful suggestions among many to supplement initiatives already being undertaken by both government and civil society in ensuring a transparent and accountable management of the natural resources of Ghana. The ideas shared here are largely based on knowledge gained by the writer from PWYP Norway and NHH’s recent conference on Financial secrecy, society and vested interests in Bergen, Norway.
Ghana in the last quarter of 2010 began the commercial production of oil from its Jubilee fields offshore. According to initial estimates by the World Bank in 2009, the country stands to rake in about $ 1 billion annually as revenues with potential for higher amounts given further exploratory activities. While this amount appear relatively meagre compared to that of Norway, Nigeria and other established oil economies, it would be erroneous to underestimate the significant impact it could have in transforming the country’s economy and lives of Ghanaians in general. The call for transparent, accountable and judicious use of the oil and other minerals’ revenues thus needs no emphasis.
As part of measures to transparently manage the oil and gas revenues, the Petroleum Revenue Management Law was passed in 2011. Whilst the law in itself meets international standards and has received a number of positive comments by both local and international stakeholders, it is no guarantee for transparency and accountability. As was pointed out by several speakers at the conference in Bergen, the existence of laws are prerequisites but not sufficient. It is important for the country to develop strong institutions capable of implementing these laws. The independence and resourcefulness of state institutions are critical to ensure both multinational companies and the political leaders are accountable for every penny worth of the oil resource.
One important area the government needs to concentrate on is the area of negotiations and award of exploration blocks or mining concessions. It is common knowledge that multinational corporations bring to negotiation tables vast knowledge and experience most governments especially in developing countries may not match. Opportunity makes thief and companies would exploit every avenue to maximise their revenue flows to outdo their competitors. To avoid such opportunities, governments must create equal terms in production agreements to avoid negotiations where companies would have the upper hand to reap to their satisfaction. When all companies are also given equal terms in the contracts, it eliminates the opportunity for companies to bribe political leaders during negotiations in order to get their favourable terms. Ghana currently awards oil contracts based on Petroleum Agreements found in the Petroleum Exploration and Production Law (PNDC Law 1984). As the country seeks to review this law, the suggestion here is that production terms must be clearly stated in the new law and very limited opportunities be allowed for negotiations between the multinational companies and the government in future.
For the area of mining, in order to maximise benefits, there is a need for a paradigm shift from the concessionary system. Mining blocks must be identified, mapped and competitively bided for by mining companies as is done in the oil sector. The continuous provision of stabilisation clauses (some of which are for over 10 years) for mining companies has been to the detriment of the country in terms of revenue generation and must be carefully reconsidered. It is important that a new bold approach modelled to safeguard both the interests of the mining companies and the State is fashioned out.
The need for a new comprehensive tax policy to specifically cater for the extractive industry should be considered. The new tax regime must take into consideration how issues such as transfer pricing and derivatives are accounted for. It is becoming increasingly clear that multinational corporations rob countries of resource revenues through these mechanisms. As the oil revenues begin pouring in, the tax and revenue authorities must take steps to seal legal loop holes that can create opportunities for tax avoidance.
On the frontiers of transparency, it appears the country in recent times is doing well. The establishment of the Public Interest and Accountability Committee for the oil sector and the EITI Ghana for the mining sector are good initiatives. Whilst global efforts such as the implementation of CBCRare being pursued by civil society organisations, at the national level, the need for disaggregated reporting is critical. To ensure outmost transparency rather than publishing total receipts of payments to the government, specific payments by each company both in the oil and mining sector must be demanded.
This article cannot be conclusive without bringing into focus the immense work various civil society organisations and think-tank groups in Ghana and outside have been doing to ensure the country maximises its benefits from natural resources. Groups such as the Civil Society Platform for Oil and Gas and WACAM readily come to mind. Whilst their efforts are bearing fruits, it is important going forward that they will close their ranks and speak with a united voice rather than individually. This would not only ensure a well coordinated approach but also would minimise potential external vilification and attacks.
How much resource a country has is not important, how well its people exploit it would make them either poor or rich!
