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Oil money not efficiently managed – Report

  • SOURCE: | qwesa2big
  • oil money • But Finance Minister says it is disingenous

    A latest report on the management of oil revenue has blamed some Ghanaian officials of not managing it efficiently.

    A key finding of the report by the Africa Centre for Energy Policy (ACEP), a local think tank, with support from Oxfam, is that Ghana is not deriving value for money from the infrastructure projects funded with oil and gas revenues.

    Titled, “The two sides of Ghana – How good oil revenue law do not stop oil revenues from going down the drain,” the report said most of the projects had been delayed, operated under costly extensions and led to cost over-runs.

    It said some of the road infrastructure which were partly funded from oil revenues and were at different stages of completion with a few actually completed were; emergency works on the upgrading of the Ho-Adidome and the Adaklu Xelekpe-Aduadi roads; reconstruction of the Navrongo-Tumu road; reconstruction of Asankragwa-Enchi road; emergency rehabilitation works on Dansoman main road in Accra; and reconstruction of the Berekum-Sampa road.

    “While the projects funded from oil and gas revenues may have long-term economic prospects in project communities, the short-term social and economic impacts during the construction phase have been severely limited, as contractors mostly bring workers, food and materials from non-project communities,” the Executive Director of ACEP,

    Mohammed Amin Adam, said when he gave an overview of the report during the launch in Accra on Wednesday, July 31, 2013.

    However, the Minister of Finance, Mr Seth Tekper, told the GRAPHIC BUSINESS on the sidelines of the Institute of Financial and Economic Journalists (IFEJ) / STAR Ghana forum in Accra, that the report was disingenuous because “we were not only funding roads from oil revenues”.

    He explained that the oil inflows could only be used as counterpart funding and that the Petroleum Revenue Management Law clearly spelt out how the oil money should be used.

    Mr Terkper stated that expenditures on such capital projects came from various resources and petroleum revenue would not be used exclusively for it, stressing “they should have come to the Ministry of Finance to find out the other sources for the financing of these projects.”

    Mr Amin said over the period, there had been widespread breaches of the Petroleum Revenue Management Act, 2011 (Act 815) and application of oil funds to projects which did not deliver value for money.

    He said the ability of the Ghana National Petroleum Corporation (GNPC) to manage its share of oil revenues allocated to it had come under serious doubt.

    Mr Adam criticised the national oil company for continuing to make huge investments at the risk of low returns, citing that the Corporation’s equity share (stake) dropped from US$132.48 million in 2011 to US$124.63 million in 2012, whereas its investment portfolio rose from US$75.48 million in 2011 to US$106.32 million in 2012.

    The report criticised the Minister of Finance (MoF) for having so much discretionary powers which could provide room for politically motivated project selection that could be demonstrated by high political consideration for ‘equity’ at the expense of efficiency and value for money.

    It, therefore, recommended that such power be curtailed, stating that discretionary authority was regulated by article 296 of the 1992 Constitution of Ghana, which required that persons exercising discretion apart from a judge must publish by constitutional instrument regulations to govern the exercise of those powers.

    The ACEP, therefore, urged the finance minister to comply with the provisions of the Constitution before the presentation of the 2014 Budget and Policy Statement of government to parliament.

    Another finding was that in the past two years, allocation of the Annual Budget Funding Amount (ABFA), the percentage of oil revenue dedicated to budget financing to some of the expenditure items did not demonstrate significant allocation efficiency as they were allocated to areas other than social and economic priorities.

    But Mr Terkper said GNPC’s allocation and investments into oil production was part of the efforts to maintain Ghana’s direct stake in the upstream petroleum sector to increase the country’s overall benefit from the sector.

    The Minister of Finance is expected to announce a new set of priority areas in the 2014 budget for oil revenue spending in accordance with Section 21 of Act 815, having first set priority areas in the 2011 budget.

    This prioritisation is to be reviewed every three years after the initial prioritisation.

    A Senior Policy Manager in charge of Extractive Industries at Oxfam, Mr Ian Gary, said the report demonstrated that Ghana had a lot of work to do to avoid the corrosive and corrupting effects of oil booms seen elsewhere in Africa.

    Source: Graphic Business

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