Perfect Pre Planning Prevents Poor Performance

Part 1

“Oil is the devil’s excrement”. Those are not my words. They were said by Juan Pablo Perez

Alfonso, a founder of OPEC but, they could have been mine too. It is well known that, oil

wealth creates major opportunities but, if mismanaged, it leads to many problems. Resource

curse is the term used to describe the failure of resource-rich countries to benefit from their

natural wealth. Countries with large endowments of natural resources, such as oil and gas,

often perform worse in terms of economic development and good governance than do

countries with fewer resources. Paradoxically, despite the prospects of wealth and

opportunity that accompany the discovery and extraction of oil and other natural resources,

such endowments all too often impede rather than further balanced and sustainable

development. Perversely, many countries rich in natural resources are poorer and more

miserable than countries that are less endowed. This is clearly visible in Sub-Saharan Africa.

Countries in Sub-Saharan Africa such as Angola, Nigeria, Sao Tome and the Principe, Chad,

Mauritania, Equatorial Guinea, Gabon and Cameroon have all failed in utilising their

respective oil revenues to foster economic development thereby creating wealth for their

people.

For example, 70 percent out of the 140 million people of Nigeria lives on less than $1 a day

and yet, Nigeria produces an estimated 2 million barrels of oil per day which equates to 2

billion cubic feet of gas per day. Currently, a barrel of oil hovers around $130 and the

international market price for a cubic feet of gas is $0.14. Upon all this wealth, abject

poverty is the order of the day in Nigeria. Without mincing words, Nigeria suffers from

endemic corruption because, according to the Economic and Financial Crimes Commission of

Nigeria, the leadership elite were able to steal about $400 billion between 1960 and 1995.

According to the International Monetary Fund, of the $5bn Angola earns from oil revenue,

$1bn disappears into the private bank accounts of the elite, and does not pass through the

Central Bank. How and why I ask? On the other hand, the lack of natural resources has not

proven to be a fatal barrier to economic success. The star performers of the developing

world- the Asian Tigers (Hong Kong, South Korea, Singapore and Taiwan) all achieved

booming export industries based on manufactured goods and rapid economic growth without

large natural resource reserves.

This generally bleak picture among resource rich countries nonetheless masks a great degree

of variation. Some natural resource rich countries have performed far better than others in

resource wealth management and long-term economic development. For example, some

thirty years ago, Indonesia and Nigeria had comparable per capita incomes and heavy

dependencies on oil sales. Yet today, Indonesia’s per capita income is four times that of

Nigeria. For instance, in comparing diamond rich countries of Sierra Leone and Botswana,

one sees that, Botswana’s economy grew at an average rate of 7 percent over the past 20

years while Sierra Leone plunged into civil strife, its gross domestic product (GDP) per capita

dropping by 37 percent between 1971 and 1989. The question is, can Ghana succeed in

managing its oil wealth efficiently and effectively as compared to most Sub-Saharan African

countries who have failed in this quest? As a nation, have we been able to use the wealth of

our natural resources such as gold, diamonds and timber to foster economic development?

Have we been able to develop linkages between the mining sector and the economy? Are

the sprawling poverty at mining towns such as Obuasi, Tarkwa, Akwatia, and Prestea

testament of our failure? Mining extraction started in Obuasi and Johannesburg just over 100

years ago but, whilst the South Africans have been able to use the proceeds of gold thereof

to transform Johannesburg into a world class city, Obuasi on the other hand is a town deeply

steeped in poverty and deprivation. What went wrong? Against this backdrop, where lies the

confidence and hope that, as a nation, we will succeed in developing our oil find effectively

and efficiently? We can only succeed when we learn lessons and learn from our mistakes

but, as Ghanaians, do we ever learn lessons from our mistakes?

Some years back, a ship load of oil vanished from Ghanaian territorial waters without being

spotted and was later recovered in Nigeria. An investigation was conducted and

recommendations made. Just this year, a ship load of oil which was destined for Tema from

Saltpong mysteriously vanished again from Ghanaian territorial waters only to be found yet

again in Nigeria. Did we learn any lessons from the first incident? Obviously not, otherwise,

there would not have been a repetition. How can the gift of natural resources, including oil

and gas, be turned around to be a blessing to the Ghanaian people rather than the curse

many say it can be? These are the questions to explore in this and subsequent articles in

reviewing the best way forward as some Ghanaians worry that, the great prospects of oil

and gas may prolong Ghana’s nightmare rather than help the people down the path of

sustainable prosperity.

Ghana’s oil find belong to Ghanaians. The people of Ghana through their elected government

and representatives have the enormous responsibility for developing these resources for

their benefit and the benefit of future generations. It is crucial that ordinary Ghanaians feel

confident that they own these resources and that they have a voice in how they are

exploited and in how the revenues these natural resources generate will be disbursed. As a

nation, we must engage in a public debate about how the country will develop Ghana’s oil

and gas wealth for our long term good. On this score, the government has started off well

by holding an international conference as to the best way forward but, starting off well does

not necessarily mean that, it will end well. What goes into the planning will prevent poor

performance. Any public debate must define the institutions that will manage the oil wealth,

the role of international oil companies and other outside actors, and the system for

collecting, investing, and disbursing revenues from the oil industry. The people of Ghana

must develop their own oil policy and their planning but, we must learn from countries

such as Malaysia, Botswana, and Norway, and the goal of such policy and planning should be

to ensure optimal benefits to Ghana and not to enrich a few at the expense of the many. Oil

extraction does not inevitably result in poor development. If revenues are managed

transparently, accountably and fairly, then oil will become a blessing in Ghana.

In order to develop a sense that, the country’s oil wealth belongs to the people of Ghana

and they have a voice in its management, the Ghanaian people must have reliable

information. This requires adopting a practice relatively new to Ghanaian culture:

TRANSPARENCY, the obligation of all actors in the oil and gas sectors to operate in a

manner that allows for public scrutiny. Transparency is a tool that strengthens institution

building. In societies such as Ghana’s, where institutions like parliament and the press are

still weak but growing, transparency can allow for concerned citizens and non-governmental

organizations to shed light on unsound decision-making, disclose fraud, waste, and

substandard practices and press government officials to account for their actions.

Transparency also allows investors to gather information which will enhance the investment

climate, improve the quality of investment decision making and increase trust. We should not

only preach about transparency but, we should practice transparency in all its format.

Transparency is not a stand-alone tool, and it is only a start but, if it seen as a prerequisite

to other types of state and market reforms, it promises real payoffs for managing

expectations, reducing social tensions, and providing more stability. In this respect, it has

the potential to provide real governance dividends in the energy sector in Ghana. Greater

access to information sets the framework for producing better monitoring, and both

information and monitoring create incentives for the involvement of those who currently

are (but need not be) adversely affected by petroleum exploitation. The interactive efforts of

information, monitoring, and participation can create the necessary conditions for making

many of the current government proposals for overcoming the resource curse to work. This

is because overcoming information, monitoring, and participation deficits can help to create

a new consciousness among leaders and citizens that dependence on petrodollars alone is

not a sustainable basis for development. Declaring what is being paid to government,

revealing the needs of the country, and showing that plentiful petrodollars are really not so

abundant after all, will give arise to debate over how more revenues can be raised. We must

institutionalize efficient management, transparency and good governance of oil and gas

resources, otherwise there are serious risks of economic failure and environmental

catastrophe leading to political and social unrest.

Transparent and accountable management of revenues from oil and gas will ensure that,

the accrued wealth thereof, will translate into sustainable development. Corruption and

mismanagement breed in opacity, and the resulting instability is bad for business, it

damages the reputation of companies, and results in lower investor returns. Transparency

can help change the resource curse into a blessing in Ghana by facilitating and improving

the accountability of companies and government to their investors and citizens respectively.

Ensuring access to information about how much money government is receiving or has

received from oil thus far, empowers citizens to hold our government accountable, monitor

how the money is spent and lobby for responsible public spending. Greater accountability

should limit bad practices and the mismanagement of oil revenues which all too often fuel

corrupt elites and create social conflicts. If managed properly, oil revenue will provide the

basis for poverty reduction, economic growth and sustainable development.

Even though it may offend some who think Botswana is a small country, I say again that,

we can profit by learning from Botswana. It is better to get wise late than never. If we do

learn from them, just as we can from South Korea, Malaysia and Singapore, poverty may

God forbid, apply for a resident permit in Ghana. We must learn lessons from our past

mistakes and use our oil find to create wealth and sustainable prosperity for the citizens of

Ghana.

Part 2 of my article will attempt to offer solutions, and the best way forward.

Nana Yaw Ossei

London.

[email protected]