Black Gold In Ghana:A Blessing or a Curse?

It is the prayer of every country to discover natural resources like oil. Many African countries including Nigeria, Angola and Gabon and many countries in the Middle East depend on oil. What has the discovery of oil done for these countries? Apart from the financial prosperity it brought to them, the drilling of oil has brought in its wake, social and environmental conditions that can either make or mar them. Nigeria went through a civil war 40 years ago which virtually brought the country to her knees These civil wars cannot be blamed wholly on oil, but the promise of oil spurred the secessionists The Middle East, despite her riches accruing from oil, has gone through diverse problems. With the discovery of oil, in Ghana, is it going to be a blessing or a curse to the people? Ghana is already blessed with minerals like gold, diamond, manganese and bauxite. Did we see any prosperity in the country which is primarily due to mineral production? The foreign companies have surely benefited, but the benefits to the Government and the local communities are less than we would expect. The Obuasi area where gold has been mined for over a hundred years is a case in point. Obuasi is generally described as a "big slum" which is hanging on a thread, because its underground has been dug up and dynamited. According to some, a slight earthquake will bring the entire town down. In recent years, surface mining has become common. Communities in all the mining areas are claiming loss of land, forest degradation and pollution of water resources as a result. Oil production can bring prosperity but at what cost? Already different contracts have gone to foreign companies who have great stakes and shares in the oil wealth. It is strongly believed that Ghana as a country has only 30 percent share in the entire oil production. (the contracts have not been made public) The rest of the profits will likely go to foreign firms. Ghana may have very little control over the export marketing of the oil. This accounts for the reason why sometimes Nigerians queue at petrol stations to buy petrol and diesel.

The Government should formulate a comprehensive policy for compensation and corporate social responsibility and ensure that the oil and other mining companies follow it.

The Government must provide adequate compensation for local communities who suffer as a result of oil drilling. But that could surely raise rightful claims by communities in Obuasi, Prestea and other old mining areas mining for historical compensation.

There are two dangers that need to be dealt with to ensure peace and prosperity in the age of oil drilling in Ghana. Heightened expectations are one danger. Ghanaians should not expect prosperity from oil without hard work. According to the International Monetary Fund, oil income to the budget will be worth about $40 per person in 2011, less than $1 a week. With the fast rate of population growth, this amount will reduce with time.

In the best case scenario, the oil wealth will enable Ghana to import most necessary products; to support a stable currency; to provide better incentives for public servants and to finance improved infrastructure like roads, schools, and hospitals etc. These will be a good foundation for locally-induced development, but it will require an innovative private industry and an entrepreneurial and hardworking population.

Oil money can raise wage rates and expectations which will raise labour costs and, thus, the costs of goods and services and make Ghana less attractive for manufacturers moving to low-wage countries. Good economic management would be one of the major things to ensure that the country benefits from its natural resources. Peter Allum, Head of the IMF's mission to Ghana recently stated about oil revenues that it "will make some differences to living standards in Ghana but not of a magnitude that you can afford to use it imprudently, and you need very strong budget mechanisms to make sure that money ends up in programmes where money is needed,"

Here we would advise the Government to avoid subsidizing consumption, because once out of the bag, it will be difficult to get the cat of subsidies back. Subsidies for consumption will be politically attractive, but the level of oil revenues we will get will not be enough for a fast-growing population in the long-run. It will create a dependency which will be difficult to get out of. This brings us to the cancer of corruption. We all know that corruption is not a problem only at the top; it exists at all levels of society. If money allocated for projects are stolen by regional and local level officials, the oil revenues will only benefit individuals and not create national development. In that case even a good central government will be sabotaged.

We need a debate, leading to specific strategies and tactics to ensure that the modest revenues we will get trickles down to the whole economy

Stephen Owusu

Author: Dark Faces at Crossroads

Email:[email protected]

and

Dr. Richard Afriyie Owusu

Helsinki School of Economics

Email: [email protected]