
(ISSN
0850–7902)
Avoiding the Oil Curse in Ghana: Is Transparency Sufficient?
Franklin Obeng-Odoom*

Abstract
This article
assesses measures put in place by the government of Ghana to manage Ghana’s
newly found oil. It uncovers two actors – the people in the ‘oil communities’
and the oil companies – that have been ‘forgotten’ by the government and yet
are critical to unlocking the so-called ‘oil blessing’. It is argued that the
existing policies do not sufficiently account for the peculiar needs of the
communities in which oil will be drilled. The existing policy paradigm implies that
the activities of the oil companies might set in motion corrupt practices among
public officials and worsen the plight of the poor.
Key Words: Oil, poor, curse,
corruption, Ghana, activism.
Résumé
Cet article
fait l’évaluation des mesures prises par le gouvernement du Ghana pour gérer le
pétrole récemment découvert dans le pays. Il révèle deux acteurs – les
habitants des ‘communautés productrices de pétrole’ et les compagnies
pétrolières – qui ont été ‘oubliés’ par le gouvernement et qui, pourtant, sont
essentiels pour libérer ce qu’il est convenu d’appeler la ‘bénédiction du
pétrole’. D’aucuns soutiennent

* Chancellor’s
Post Doctoral Research Fellow, School of the Built Environment,
University of Technoloy, Sydney. Email:
franklin.obeng-odoom@uts.edu.au
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que les politiques existantes ne tiennent pas suffisamment
compte des besoins particuliers des communautés dans lesquelles il y aura des
forages. Le paradigme politique existant implique que les activités des
compagnies pétrolières pourraient mettre en branle des pratiques de corruption
chez les responsables publics et aggraver la situation déjà difficile des
pauvres.
Introduction
‘What do you
wish for?’ asked the god. ‘Gold’, begged the king. ‘I wish that everything I
touch would turn to gold.’ ‘It may not make you happy’ warned the god, ‘but if
that is what you want I grant your wish’!
Al Perkins, 1969, King Midas and the Golden Touch, pp.16-21,
Random
House Inc
Ghana is at a
crossroads. On the one hand, it faces severe economic challenges: an estimated
28.5 per cent of the Ghanaian population lives under the poverty line (Ghana
Statistical Service 2007); about 80 per cent of Ghanaians live under US$2 a day
(Gary 2009) and GDP per capita is less than US$400 (Moss and Young 2009). At
the urban level, it is estimated that 82 per cent of the urban population in
Ghana have no access to improved latrines (World Health Organisation and the
United Nations Children’s Fund 2010) and 45 per cent of the urban population
live in slums (UN-Habitat 2009).
On the other hand, it has the potential to change its
socio-economic fortunes. By the first quarter of 2010, Ghana will export oil in
commercial quantities. The country’s first oil field is called ‘Jubilee’
because it was discovered around the same time Ghana celebrated 50 years of
independence from British colonial rule (Hufstader 2008). Ghana is likely to
become the seventh largest oil producer in Africa (Staff Writers 2008).
The initial reaction to the
discovery of oil in 2008 was euphoric. The pomp and pageantry that greeted the
news started at the seat of presidency in the castle, Accra, where ‘President
Kufour gave an impromptu speech to the media with a glass of champagne in one
hand and a glass of crude oil in the other. He expressed ‘joy’ that he would
‘go down in history’ as the president during whose tenure oil was found. Oil,
he said, was ‘a shot in the arm’, and Ghana was now ‘going to fly’. He said
Ghana was going ‘to really zoom, accelerate’, and ‘if everything works, which I
pray will happen’ then in only five years [Ghana] would ‘truly’ emerge as an
‘African Tiger’. ‘Ghana will suc-
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ceed’ ‘because this is our destiny’’
(McCaskie 2008:323). Not only will oil provide jobs, it will also bail the
country out of its perennial energy crises. According to the president,1
‘we pray that the company would be successful so that our country would not
become a beggar in the energy sector anymore’ (Boakye-Dankwa 2008).
The euphoria spread to other sectors. In the energy
ministry, the Energy Minister literally ran to parliament House with a
receptacle that contained a sample of the oil. According to the minister, the
previous government was only able to discover salt, while his government had
been more focused and, hence, had been rewarded with oil. To make his case more
picturesque, he lifted two containers – one with oil and the other, salt, – for
members to see for themselves the difference between the two governments; a
gesture that was greeted with the traditional majority ‘yeeh yeeeh!’ (Joy FM
2008). Churches organised well-attended ‘all night’ prayer sessions to thank
God for the discovery of oil. One of them had a banner that read, ‘National
Prayer and Thanksgiving Service for Oil Discovery in Ghana All are cordially
invited. Be aglow for
Jesus'.2
Subsequent reactions have been more tempered, particularly
because of a fear of the resource curse – the phenomenon where the presence of
natural resources like oil leads to stagnation or perhaps retrogression in the
fortunes of the host country as ‘resource curse’ or the ‘paradox of plenty’. It
is a paradox because it is assumed – and reasonably so – that in the midst of
plenty, countries should flourish but, concurrently, natural resources like oil
tend to set in motion an array of challenges that can lead to socio-economic
and political stagnation in the host country. Conflicts may arise over gaining
more access to the oil resource. Overdependence on oil may lead to revenue volatility,
the neglect of other sectors of the economy like agriculture, human resource
development and the collection of taxes. These may culminate in excessive
borrowing (in the hope that petrodollars would easily pay the debt (see Karl
1997 for fuller discussion).
This paper has two aims. First, it discusses the resource
curse thesis by looking at the theory and empirical evidence in Africa. The
second aim of the paper is to examine the effectiveness of ‘good governance’,
particularly transparency, as a key policy prescription, which the Government
of Ghana is pursuing to avert a possible resource curse. The paper is divided
into five sections. Section 2 looks at the resource curse thesis, section 3
examines the effectiveness of policy prescriptions from a conceptual
perspective, while section 4 complements the analysis by considering Nigeria’s
experience with oil. Finally, section 5 discusses the lessons of the Nigeria
case for Ghana.
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The Resource Curse Thesis
Those on the ‘resource curse’ train in Ghana
have been many, ranging from academics, the clergy, politicians, journalists
and civil society. The warning about resource curse comes in different shades
and under different titles. For example:
l ‘Mr.
President, Watch out! Oil money is coming, but corruption will follow’ (Saminu 2009).
l ‘Oil will
be hot potato for energy minister’ (Public Agenda 2009).
l ‘Oil hot
spot Ghana must proceed with caution’ (Hart 2009).
l ‘Ghana: Why
Country Should Not Bank on Oil’ (Osei 2009). It is important to insert
these concerns within the broader discussion of the oil curse thesis. Before
the 1980s, the prevailing view was that countries with significant deposits of
natural resources were most likely to develop their economies and institutions.
Scholars from various disciplines expoused this view. In geography, Norton
Ginsburg and in economics, Arthur Lewis, Walter Rostow added their voice, and
perhaps weight, to such claims (Rosser 2006).
However, since the 1980s, the phenomenon known as the
resource curse became the more accepted view. The phenomenon was first
discovered in the Netherlands where the discovery of natural gas in the 1960s
led to negative effects on the Dutch economy: the Guilder, the Dutch currency,
appreciated and led to negative effects on made Dutch exports uncompetitive and
national attention was given to the development of the natural gas resource to
the detriment of the manufacturing. In 1977, The Economist periodical coined
the term ‘Dutch Disease’ to describe the fate of the Netherlands (Goodman and
Worth 2008:204; Collier 2009:39).
As a concept in economics, however, the term has come to be
used more generally to refer to the negative relationship between resource
wealth and the economy. Hence, the resource curse is sometimes called ‘the
paradox of plenty’ (see, for example, Auty 1993). Indeed, resource poor
countries such as Switzerland and Japan have usually outperformed resource rich
countries such as Russia. The Newly Industrialising Countries (NICs) of East
Asia, such as Korea and Singapore, have consistently surged ahead of resource
rich countries such as Venezuela (Sachs and Warner 1995). Such is the paradox
that led Sheik Ahmed Yamani, Oil Minister of Saudi Arabia, to contend that ‘All
in all, I wish we [Saudi Arabia] had discovered water’ (cited in Goodman and
Worth 2008:201).
The curse can plague all continents. However, Africa is the
focal point of considerable research and interest regarding the resource curse
thesis (Obi
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2009), perhaps because of the increasing
amount of hydrocarbons which have been discovered on the continent in recent
times (Lesourne and Ramsay 2009). Africa is a continent with significant amount
of oil, particularly in the Gulf of Guinea. As of 2007, Nigeria, Angola,
Cameroon, Chad, CongoBrazzaville, Equatorial Guinea and Gabon were producing an
estimated 5,120 million barrels per day. The Gulf of Guinea alone produces 7.1
per cent of total world production (Lesourne and Ramsay 2009:8).
Is it likely that the resource curse will whittle away the
potential ‘blessing’ of oil? The curse is potentially multi-dimensional: war,
conflict, corruption and dictatorship. A negative relationship between natural
resource plenty and economic development has been empirically established in many
parts of Africa.
In Chad, oil from the Chad-Cameroon Pipeline, alone stood at
140,000 barrels per day in 2004 and by the first half of 2005, it had increased
to 180,000 barrels per day.
Macroeconomic indicators showed some positive trends: GDP averaged 1 per
cent between 1997 and 2001, but rose to 9.3 per cent in 2005. Yet, in terms of
social effects at the household level, the oil seems to have had limited
impact. A substantial part of the revenue goes into military spending. In turn,
spending on health is low. Not surprisingly, an estimated 80 per cent of the
population live in poverty (Pegg 2006).
The experience of Angola is similar to that of Chad. A
recent evaluation by Nicholas Shaxson (2009) reports that the 2009 budget shows
significant returns from oil, totalling about US$42 billion, bigger than all
the Overseas Development Assistance the OECD countries give to the entire
African continent. In fact, oil production has kept rising: from 1.2 million
barrels per day in 2005 to 1.6 million barrels per day in 2007 and an estimated
2.0 million barrels per day in 2009. Yet, there is conflict and violence
everywhere, corruption abounds, social services are weak, mortality rates are
high and the country has become increasingly unequal (Shaxson 2009).
Similar effects have been found in other African countries,
such as the Democratic Republic of Congo where Ross (2001) has recently found
that, in spite of large reserves of oil, progress in economic development has
been low as corruption and diversion of oil wealth into militarisation has
soared. Also, oil revenue has done greater damage to democracy as states are
less accountable and more authoritarian. Auty and Pontara (2008) have recently
analysed the possibility that a resource curse awaits Mauritania where production
started in 2006. They find that, although it enjoys a significant production,
totalling about 45,000 barrels per day, the country risks the resource curse in
such a way that the political structures can be crippled and the economy can
suffer setbacks (see also Auty 2007). Across Africa, the research on the
resource
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curse has focused on oil and the economy and
oil and institutions of governance. Both themes show negative relationships:
more oil; weak economy and more oil; weak institutions of governance (Collier
and Hoeffler 2005).
The negative effect of oil on institutions and economic
development in Africa raises the question of what factors may be driving this
curse. According to Sala-i-Martin and Subramanian (2003), there are three ways
to explain the inverse relationship between resource boom and the curse of plenty.
First, resource wealth increases the chances of rent-seeking behaviour which,
in turn, may lead to corruption and its concomitant negative effects on the
economy. Second, dependence on oil makes a country vulnerable to global
fluctuations in oil prices. Third, oil may drive out investment in other
sectors.
Within this simplified framework, several studies have shown
the more complex picture. For example, Collier (2009) has found that oil-rich
countries with democratic governments tend to under invest because they are
more interested in projects which would make them win the next elections. When
they do invest, their choice of investment is usually unwise. Thus both the
rate and return of investment in oil-rich countries are low (Collier 2009:44).
The work of Collier reflects the general concerns about the ‘rentier state’.
Resource-rich countries tend to rely less on taxation by citizens and more on
economic rents from the oil resource. The lack of accountability weakens
democratic institutions as government officials tend to use the rents to
corrupt voters and opinion leaders. Rentier states prefer not to invest in
public services because they do not feel any pressure from citizens, whose
taxes tend to make them hold governments to account. By avoiding investment in
labour-intensive infrastructure development and the provision of social
services, unemployment tends to be high in resource-rich countries (Auty 1997;
Auty and Pontara 2008).
Another perspective on the causes of the curse is how
natural resource abundance crowds out other economic growth-enhancing sectors,
such that those sectors contribute little to national growth. The oil sector
may also have a wage premium that can crowd out entrepreneurial activity. If
such entrepreneurial skills are in short supply and they enhance growth,
drawing them into the oil sector may constitute a brake on economic growth
(Sachs and Warner 2001). These drivers of the Dutch Disease build on concerns
arising from the Prebish-Singer model, which suggests that the prices of
primary commodities such as oil are volatile and typically tend to decline over
time, compared to manufactures, so that dependence on natural resource is not
good for a country as the country is likely to suffer price shocks. Other
economic reasons for the paradox of plenty come from the idea that wealth
obtained without sweat
95
leads to indolence (Sachs and Warner 1995).
These various concerns about the effect of the resource
curse suggest that an array of political and economic problems is the likely
outcome: widening inequality, worsening poverty levels, low economic growth,
underinvestment and low returns to investment and corruption, dictatorship and
civil strife (see, for example, Ross 2006; De Soysa and Neumayer 2007). The
distributional dimension is important but the research on ‘who suffers what’ is
sparse (Frederiksen 2007). However, the few studies suggest that women and
children face a more precarious situation when the curse strikes while
corporate elites and politicians, often men, win. Ross’s (2008) work is
revealing. Based on global data, he finds that oil abundance leads to the
contraction of the traded sector, a fall in the wages there and a rise in the
non-traded sector and the wages there. Since women tend to be
disproportionately in the traded sector, their participation in the labour
force declines. In turn, their political influence declines. Children also bear
a disproportionate burden. For each increase of mineral dependence of five
percentage points, the mortality of children who are under 5 years rises by
12.7/1000 (Vidyasagar 2005:743744). On the other hand, politicians, the elite
and corporate power benefit considerably from the exploitation of the oil
resource as a result of corruption and patronage politics (see, for example,
Rosser 2004; Watts 2005). The concern with these aggregate and distributional
aspects of the presence of the resource curse leads to the question of what can
be done to avoid it.
Avoiding the Resource Curse: The Main Policy Prescriptions How
can the resource curse be avoided? Neo-liberal thinking is that, with
transparent management and incorruptible institutions, the resource curse will
be avoided and turned into a resource blessing for all. As noted by the
International Monetary Fund (IMF), ‘Given the potentially substantial costs of
nontransparent practices, institutional strengthening to improve transparency
in vulnerable resource-rich countries should provide ample pay-off for a
relatively modest investment. In particular, transparency can help establish
and maintain credibility in regard to the collection and distribution of
resource revenue’ (IMF 2007:4).
The most authoritative writers on the resource curse agree.
Auty (2000, 2007) has argued that a more accountable state is all that is
required to cure the curse. Collier (2009:140-151; see also Collier and
Hoeffler 2005) comments at length about how transparency and democracy can help
the situation. Other scholars (e.g., Dietz et al. 2007) have lent their support
to the
96
‘good governance, less corruption thesis’,
claiming that greater liberalisation and, hence, internationalisation reduces
corruption (See, for example, Rosser 2004 and Rosser 2006 for a review). Of all
these exponents, the World Bank has been the most outspoken advocate of good
governance. According to the Bank, extraction of oil in a context of good
governance leads to the reduction of poverty and improvement in social
conditions (see Pegg 2006). To the question ‘why is there the resource curse?’
Paul Collier (2009:42) says, ‘I think the evidence points to governance as the
key problem’. Several initiatives have been launched in furtherance of this
view. In 2002, Tony Blair, former UK Prime Minister, launched the Extractive
Industries Transparency Initiative (EITI) as a measure to improve transparency
in the extractive industry. Other initiatives include George Soros’ ‘Publish
What Your Pay Campaign’ and the G-8 Declaration in 2003 on transparency (See
Jerome et al. 2005 for discussion).
The government of Ghana has emphasised the need for
transparency and good governance too. According to a minister for energy, Mr.
Felix Owusu Agyapong, ‘if we can begin to improve the level of transparency,
the oil find can be a blessing’ (GNA 2008b). When president John Mills recently
met the diplomatic community in Accra, he said:
Your Excellencies, I am aware
that in Africa and elsewhere, the onset of oil wealth, in the absence of
adequate legal structures and safeguards, tends to erode democratic
accountability. This government will take steps to address transparency and
governance concerns relating to the nation’s oil find (GNA 2009).
To make oil benefit all, Boakye-Dankwa
(2008) argues, government institutions like the Ghana Standards Board and the
Environmental Protection Agency should be strengthened. The government of Ghana
has commissioned numerous committees and called for ‘technocratic’ management
in order to make Ghana’s oil a blessing. In fact, a ministerial committee on
oil and gas and a ‘technical’ committee have been put in place to produce a
National Oil and Gas Policy and a Gas Master Plan; and plans have been made to
set up an Oil and Gas Authority to regulate the commercial production of oil
(Hope and Yeboako, 2008). Ian Gary, a senior policy advisor with OXFAM America,
has also observed that ‘Ghana’s challenge will be to ensure that the right
institutions and transparent policies are in place before oil production
starts’ (Gary 2009:3).
This emphasis on transparency is summarised in an article
that appeared in the Economist on ‘The curse of oil’. The article quotes the
response of an elderly American parishioner who asked an African who had come
to the church to complain about the devastations of America gasoline on
‘faraway lands’: ‘I
97
know Africa is very rich in diamonds, gold
and oil, but the people are very poor. Why are your governments so bad at
managing that wealth?’ (The Economist 2005). From this background discussion,
it is important to ask two key questions: Is corruption the genesis of the oil
curse and therefore will incorruptible institutions and officials guarantee an
oil blessing for ‘all Ghanaians’? And does good governance have a trickle-down
effect?
Is Corruption a Precursor for Oil Crisis?
In reviewing the resource curse literature,
Pegg (2006) depicts the following typical sequence: ‘natural resource booms,
less accountability, increased corruption, misallocation of resources, poor
economic and political performance’ (p.4). When oil falls into the hands of
states, they become less reliant on taxes from the people. This makes them less
accountable to the people and more corrupt. The major driving force in the
resource curse thesis is corruption, but this can be linked to conflict and war
too. To borrow from Kaldor and Karl (2007, np) ‘the main reason why oil-rich
countries are prone to war is because of the character of their society and
economy. Sectarian groups compete for access to oil resources and finance their
military adventures through smuggling oil, kidnapping oil executives, or
blowing up pipelines. Outside intervention only makes things worse…’ The
literature on the devastations of oil has persistently placed corruption as a
driver of the crisis. However, this depiction is ahistorical and does not tell
us what exactly triggers corruption.
Generally, the role of transnational corporations (TNCs) in
the oil industry can cause and usually intensifies the likelihood of
corruption. One way to look at the role of TNCs is to examine them in the
owner-worker relationship. TNCs in the oil industry tend to exploit their
workers, leading to agitations for fairer treatment. This agitation is
intensified as many of the workers, who hitherto were tilling the land, cannot
go back to the land, having been expropriated with neither fair nor adequate
compensation. However, this ‘worker alienation’ framework is inadequate. The
role of TNCs in the oil-development nexus is a more complex terrain of
transnational capitalist accumulation and dispossession, mediated by various
global, national and local factors (Obi 1997; Ikelegbe 2005).
Oil companies tend to bribe the key personnel in neo-liberal
state apparatus, the media and the community leaders that are too ‘loud’. Such corrupt states have curiously obtained
support from Western countries like the USA and UK. This support has come in
the form of international praise, refusal to reprimand dictatorial regimes,
selling of arms to dictators or directly funding their activities. The
rationale for this ‘unholy alliance’ between the western
98
countries and the neo-liberal states in
Africa, according to a middle-level state department USA official, is that
corrupt states, and especially military ones, are better able to guarantee USA
interest in oil even though they use crude means (Fleshman 2002). A Few months
before his illegal execution, the Nigerian political activist and writer, Ken
Saro Wiwa (1995:245-246), wrote of Britain:
Ultimately the fault lies at the door of the British
government. It is the British government, which supplies arms and credit to the
military dictators of Nigeria, knowing full well that all such arms will only
be used against innocent, unarmed citizens. It is the British government, which
makes noises about democracy in Nigeria and Africa but supports military
dictators to the hilt. It is the British government, which supports the rape
and devastation of the environment by a valued taxpaying labour-employing
organisation like Shell. I lay my travails, the destruction of the Ogoni and
other peoples in the Niger Delta, at the door of the British government. Western countries and their multinational
corporations tend to support predatory states once these states guarantee them
oil. In exchange, these governments are not pressured to live up to democratic
standards and, even when this unholy alliance becomes too glaring for worldwide
condemnation, the predatory states are still left untouched because, according
to their western collaborators, they are ‘sovereign’ (White and Taylor 2001).
The opposite logic is true. Whenever the state proves to be unsupportive of these
oil hungry western countries, there is military intervention in the name of
securing human rights (Ifeka 2004). Thus, Markusen (1978) has argued that there
is a negative correlation between a state guarantee of oil and violence or
corruption in oil countries. According to Markusen:
The stronger the local or state level opposition to
development, or assertions or right to control development, the greater the
corporate pressure at higher levels to override or buy off opposition (Markusen
1978:128). The notion that oil companies and some western states collude
is neither new nor unknown. The General Communiqué of Oilwatch Africa
(1999:186-187) begins as follows: ‘transnational companies have supported
dictatorships, authoritarian and corrupt governments, in order to favour their
profit interest in different regions of the world’. Corruption is nearly always
part of this process (see for example Omeje 2004; Malaquias 2001; Kibble and
Vines 2001), but it is usually at the heels of dramatic exploitation of oil
communities by transnational corporations. This ‘international criminality’
(Power 2001) is lost under hue and cry about massive corruption in Africa in
western media. For example, a New York Times article, titled ‘No oil yet, but
African Isle finds
99
slippery dealings’ suggests that African
leaders are pathologically corrupt. The authors state:
The first drop of oil has yet
to be produced but Federal investigators suspect-oil-related corruption. All of
this might not seem unusual in Africa, where oil and corruption often go hand
in hand (Meier and Mouawad 2007).
It is important to note, however, that
corruption may be a systemic feature of the neo-liberal state. According to
neo-liberal analysis, the state should be minimalist because its general tendency
is to be corrupt and inefficient. The state should not regulate private
enterprises since the market is competent enough to do this. Also, with reference to direct production by
the state, neoliberal thinking is that the public sector should be downsized to
attain cost efficiency (Martinussen 1997). In other words, the market can
‘sanitise’ a corrupt and non-entrepreneurial state.
However, downsizing and deregulation can themselves be seeds
of corruption. For example, downsizing has weakened the capacity of governments
to conduct state-of-the-art audits, given that the public sector has had to
reduce expenditure. By creating opportunities for the privatisation of state
enterprises, deregulation has opened a window for some government officials to
loot state coffers in order to secretly buy some hitherto public enterprises.
With privatisation, these corrupt state officials have also had the option of
operating bank accounts in private banks (Szeftel 1998). The growing demand for
oil from newly industrialised countries like India and China, coupled with
shortage of oil and new oil finds, is incentive for the (already)
industrialised countries to pursue strategies that weaken the state in oil
producing countries (Kaldor and Said 2007). An environment of weak ‘small’
states and powerful ‘big’ private companies competing for the most profit is
sine qua non for corruption.
While it would be preposterous to contend that corruption
did not exist before the influence of neo-liberalism, ‘it is also clear that
liberalisation creates a set of new problems while not always eradicating the
old sources of dishonesty. The use of patronage and bureaucratic ‘rent-seeking’
have not been ended by market reforms; rather they have been joined by new
kinds of graft’ (Szeftel 1998:233-4). Profit-seeking enterprises can be
expected to consider any strategy that contributes to higher profitability.
Does good governance3 have a trickledown effect?
Initial deposits of Ghana’s oil are around 3
billion barrels. It is estimated that about 60,000 barrels of oil will be
exported per day at the initial stages in 2010, 120,000 barrels a day in 2011
and thenceforth, about 200,000 bar-
100
rels a day. The country is expected to earn
US$836 million annually and $20 billion over the production period 2012-2030
from offshore oil deposits, mainly at Cape Three Points near Efasu, Axim and
Takoradi in the Western region. The prospecting companies are Kosmos, Tullow
and Anadgo (Daily Graphic 2008; Achiaw 2008; Gary 2009). LukOil has also
invested US$100m to support on-shore oil exploration in Ghana which is said to
cover about 40 per cent of the landmass of Ghana, specifically in the Volta,
Brong Ahafo and Northern regions (GNA 2008a).
Out of the US$836 million annual revenue from oil, it is
estimated that about 50 per cent will accrue to the state as economic rent
(Breisinger et al 2009). Estimates of ‘local content’ in the supply of goods to
the oil sector and job creation seem to be positive. For instance, 40-60 per
cent of the jobs to be created directly from the Jubilee 1 phase will go to
Ghanaians (World Bank 2009:22). The impact of oil on the macroeconomy of Ghana
is likely to be substantial: oil will add about US$5 billion to the GDP, push
the GDP growth rate up by about 28 per cent and bring in about US$1 billion in
taxes from the Jubilee field alone (Akufo-Addo, 2010). From 2010 to 2015, oil
revenue is predicted to constitute an estimated 4 to 6 per cent of GDP (Dagher
et al. 2010).
It is expected that the country will produce gas from the
oil at a rate of one thousand cubic feet of gas per barrel of oil. Assuming a
peak Phase 1 production from the Jubilee field alone, Ghana could produce 120
million cubic feet of gas per day. Assuming current world market price for
natural gas liquids (NGL) of US$2 per thousand cubic feet, the country is
expected to obtain gross revenues of approximately US$260 million per year in
addition to the oil revenues. From these figures, a 50 per cent equity
ownership in the gas infrastructure by the Ghana National Petroleum Corporation
(GNPC), Ghana’s power production company, could lead to corporation tax
revenues of about US$120 million per year for the government of Ghana (World
Bank 2009:2-3).
The government of Ghana believes that, once Ghanaians occupy
key positions in the oil company, environmental institutions are strengthened,
corrupt officials are dealt with and jobs are given to Ghanaians and not
foreign consultants, oil should be a blessing to all Ghanaians. A similar
argument has been advanced by Kibble and Vines (2001) who studied the oil
industry in Angola. But can this ‘macro view’ impact positively on local oil
communities?
This logic is not new; it is called the ‘trickle down’
thesis and was popularised under president Reagan of USA. Reagan gave high tax
cuts to the rich, believing that ‘ a rising tide lifts all boats’. Applied to
development studies, the
101
thesis holds that poverty reduction follows
from economic growth or that, with increased wealth in a country, it trickles
down to the poor. The World Bank’s policy of infrastructure-led
poverty-reduction is a classic example. A recent study by Dollar and Kraay
(2002) argues that ‘growth is good for the poor’ although, according to the
authors, their ‘evidence does not suggest a ‘trickledown’ process or sequencing
in which the rich get richer first and eventually benefits trickle down to the
poor’. They contend that privatisation is good for the poor, as much as for
everyone else, while social spending does not in any way help the poor.
Though trickledown theory is widely criticised (see for e.g.
Frank 2007), some economists still place enormous faith in it (see for e.g. Aghion
and Bolton 1997). Applied to the discovery of oil, ‘trickle down’ means oil
will bring jobs, money for schools and community development for all Ghanaians
(that includes poor Ghanaians). According to former President Kufour, ‘oil is
money, and we need money to do the schools, the roads, the hospitals. If you
find oil, you manage it well, can you complain about that?’ (BBC 2008).
Indeed, we cannot complain about that, but we may question
whether the poor – especially those in the communities on whose lands oil
exploration will take place – will benefit from the ‘blessings for all
Ghanaians’. In order to analyse the distribution of the so-called benefits of
oil, we should return to basics – the consequences of an oil boom. According to
Goodman and Worth (2008), oil booms lead to socio-economic disadvantages (like
the weakening of non-oil sectors such as agriculture and lack of community
transformation), political disruption (like clientelism and corruption) and
environmental degradation (pollution of water bodies, for example).
In a slightly elaborated version, oil attracts the labour
force from other sectors like agriculture and frequently induces in-migration
for jobs in oil communities. However, because oil production is capital
intensive, these jobs tend to be relatively few. Many of the jobs are
short-term, during the initial drilling and construction state, while ongoing
operational jobs are few. Long-term construction jobs require some skill which
frequently has to be imported from outside the oil communities. In any case,
where those who eventually get jobs had been unemployed for a long time and
have low incomes, they do not tend to agitate for better working conditions,
given that the oil jobs pay relatively more. These jobs are insecure; not only
because of their brief nature but also because of the volatility of oil prices,
the non-renewable nature of oil and the specialised nature of the machinery
input which is often imported.
The development of an oil industry also deprives the local
community of its land, either because pipes have to be laid across farms or
because oil activities
102
despoil land previously used for agriculture
or tourism (because of say, spillage). Even locals in tertiary sector jobs like
restaurant businesses may lose their current jobs because oil boom attracts
multinational businesses like MacDonald’s that easily outcompete the local
industry (Markusen 1978:123-124). Olien and Olien (1982) have also argued that,
apart from the boost to the real estate industry, oil brings with it a
desecration of cultural values and a proliferation of prostitution and general
crime. All these consequences of an oil boom could be positive or negative.
Take the real estate example. An expansion in real estate could be a boon when
it employs the local people and trains them in construction technology. It
could, however, be a bane when developers try to maximise profit by employing
the highest and
best use principle which may prevent them
from ‘greening’ their developments.
To cast further light on these issues, the next section of
this paper analyses the interlinkages between corruption and oil and the
related transparency argument for insulating Ghana against the oil curse.
Reference is made to the experience of Nigeria, Ghana’s neighbour that has long
mined oil.
Empirical Evidence from Nigeria
Nigeria is one of the wealthiest countries
in Africa. It produces about 2.46 million barrels of oil on a daily basis. It
is also a major producer of natural gas, which amounts to about 22 million
tonnes per year (Obi 2009). Between 1970 and 1999, US$231 billion in oil rents
accrued to Nigeria (Ross 2003).
The thinking that governance can change a curse to a
blessing has led to a proliferation of governance institutions or initiatives,
including the Economic and Financial Crimes Commission (EFCC), Independence
Corrupt Practices and Other Related Offences Commission, the Nigerian Extractive
Industries Transparency Initiative and the Department of Petroleum Resources
(See, for example, Obuah 2010). Have they been effective in preventing the oil
curse?
Some gains have been made. The EFCC, for example, has
succeeded in putting over 500 corrupt people in jail and recovered money and
assets wrongly obtained, totalling over US$700 million (Obuah 2010). Nuhu
Ribadu, an anti-corruption chief, has claimed that between 2003 and 2005, the
amount of oil money stolen fell by 30 per cent (Watts 2006).
Yet, 57 per cent of Nigerians are poor (Aigbokhan 2008:13).
Also, the country is polarised between the extremely rich and the extremely
poor. For instance, in 1970 the income of the bottom 17 per cent of the
population was equivalent to the top 2 per cent of the population. However, by
2000, the income of the top 2 per cent had increased so much that it was equal
to the
103
income of the bottom 55 per cent which was
equivalent to that of the top 2 per cent (Sala-i-Martin and Subramanian
2003:4). Over the period, 1965 – 2004, income per capita fell from US$250 to
$212 (Watts 2006).
Most of the oil production in Nigeria comes from the Niger
Delta area (Obi 1997a) but social conditions in the area are poor (Obi 2007a).
An estimated 70 per cent of the people in the Niger Delta area have no clean
water, passable roads, electricity supply and adequate medical supplies
(Idemudia 2007:3). In the oil-rich states of Delta and Bayelsa, the
patient-doctor ratio is 150,000 to 1 (Watts 2006). Between 1970 and 1999, revenue from oil rose
but per capita income fell (Ross 2003). An estimated 80 per cent of Nigeria’s
oil accrue to only 1 per cent of the population, while the remaining 99 per
cent of the population struggles to share only 20 per cent of the oil revenue
(Obi 2009:123).There are also severe environmental problems in the form of
pollution and degradation in areas where oil is drilled (Obi 1997b). The area
is a source of recurrent violent conflict. Several foreign oil workers have
been captured. For instance, in 2007, nine Chinese workers were abducted and a
car bomb detonated (Obi 2008:418). In 1999, it was estimated that there were 20
deaths from oil violence per day. The figure rose to 50 deaths per day in 2004
(Arowosegbe 2009:588).
So, if Nigeria is a case study of good governance, why has
so little been achieved? The assumptions underpinning that posited solution are
mainly to blame. Advocates presume that the resource curse is mainly the result
of bad behaviour of individuals or arises from the culture of actors. But, in
fact, the curse is a function of systems and processes (Shaxson 2007). Ifeka
has argued that Western advocates of the ‘governance solution’ to the resource
curse misunderstand the nature of African politics: hierarchical clientelism is
never resolved by good governance (Ifeka 2004). Political scientists
specialising in the political economy of Africa (e.g. Obi 2009) have even
suggested that the institutions of governance are themselves caught in a
symbiotic relationship with the state, local elites and transnational
co-corporations such that it is difficult to independently ensure transparency.
Foregrounded on the wrong assumptions, the posited governance framework has
attained little and has, in fact, become a vehicle for further accumulation by
dispossession (see also Watts 2004). To illustrate the systemic nature of the
resource curse in Nigeria, the relationship between local people and Shell, the
Anglo-Dutch global oil giant, which produces about half of the oil in Nigeria
(Obi 1997a and b, 2008), should be carefully unpacked.
104
A recent study by Okonta and Douglas (2003)4
is an informative source on the effect of oil in the Niger Delta area in
Nigeria. It focuses on the activities of Shell but looks generally at the oil
industry in Nigeria. The historical analysis is impressive because of the
variety of sources on which the conclusions of the study are based. Shell,
according to the authors, arrogantly breaches environmental laws in the Niger
Delta area. It leaves oil pipes naked and rusted. These lead to frequent oil
spillage and fires. The natural result is massive ecological destruction. In
many cases, Shell has failed to compensate the oil communities for their lands.
In the few cases where compensation has been paid, Shell had to be dragged to
court to force the compensation payment. In Farah v Shell Petroleum Development
Co. Ltd, an oil spillage by Shell saw the plaintiff going to court to seek
redress. Shell, according to the authors, battled the plaintiff for 25 years
before the court finally ruled against Shell and compelled it to pay adequate
compensation to the plaintiffs. ‘Fair and adequate’, however, is very difficult
to define since in Nigeria the compensation figure is based on crop yields.
There is room for independent valuation using fairer approaches, but poor
farmers do not have the money to retain the services of independent valuers.
In terms of physical development, Shell contributes little
to the oil towns because it is not legally bound to develop these communities
once it pays its taxes to the central government. Thus, infrastructure such as
electricity, water, roads, hospitals and schools has eluded the oil
communities, even though Shell continues to make millions from these
communities. Jobs promised to the local
people have not been forthcoming and, in Ogoni alone, unemployment is about 70
per cent. Expatriates have sometimes been flown into Nigeria to replace local
staff. According to the authors:
Shell made a lot of promises:
the hospital and toilet houses were destroyed, as were the burying grounds.
They pumped out water and destroyed the farmland with promised compensation
like community and secondary schools, a road to Nembe and pipe-borne water….but
nothing has happened. It is like a dreamland (Okoraba community leaders in
November 1993, cited in Okonta and Douglas 2003:96).
Exploitation of the oil communities,
according to the authors, has led to poverty, hunger and anger. Naturally,
anger has led to civil unrests in the area. Such agitations have sometimes
forced Shell to halt operations, re-strategise – which in Shell’s case, Okonta
and Douglas note, means bribing officers of the state and causing divisions
among activist groups and community leaders – and resume operation. The
‘dissident’ few, who attempt to stand in the way of Shell, are ‘dealt with’, by
violence meted out sometimes by the Nigerian
105
army. The Coalition Against Dictatorship
(CAP) (1995:474) has alleged that one memo signed by Major Okuntimo of the
Rivers State Internal Security Task Force, and dated 12 May 1994, read, ‘Shell
operations still impossible unless ruthless military [sic] operations are
undertaken for smooth economic activities to commence'.
The struggle of the Ogoni people against Shell and the
Nigerian state has historical roots, it dates back to 1958. As global forces
became interested in oil on the land of the Ogoni people, landowners were
alienated from their land. As oil was drilled, the environment was degraded. In
turn, the basis of their livelihood, farming, was destroyed, without
compensation (Mustapha 1996). Ogoni used to be the main provider of food to
Rivers State and, since 1958, a major source of oil revenue. An estimated US$30
billion worth of oil had been drilled by 1995 (CAP 1995: 473). The conflict had
other catalysts such as the Nigerian civil war (which led to the creation of
new states and subsequent loss of control of oil by the minority ethnic
groups), military coups, which altered land rights, and the effects of free
market reforms which removed social support for many Nigerians (Mustapha 1996;
Obi 1997a:142-146).
Many have lost their lives, including the writer and
political activist, Ken Saro Wiwa. Supporters of Wiwa have been massacred and
oil communities reduced to rubble (Okonta and Douglas 2003). According to
Okonta and Douglas (2003:131-132), Colonel Paul Okuntimo, gave a detailed
account of his activities at a press conference broadcast on the Nigerian
Television Authority:
The first three days of the
operations, I operated in the night. Nobody knew where I was coming from. What
I will just do is that I will just take some detachments of soldiers; they will
just stay at four corners of the town. They…have automatic rifle[s] that
sounded death. If you hear the sound you will just freeze. And then I will
equally now choose about twenty soldiers and give them grenades explosives very
hard ones. So we shall surround the town at night…the machine gun with five
hundred rounds will open up. When four or five like that open up and then we
are throwing grenades and they are making ‘eekpuwaa!’ what do you think people
are going to do? And we have already put roadblock[s] on the main road; we
don’t want anybody to start running.
Okuntimo and his men, according to the
authors, were sometimes spotted using Shell aircraft for their operations.
Shell has been accused of being behind these infamous activities, though it has
persistently denied these allegations. Two cases: Wiwa v. Royal Dutch Petroleum
(Shell) and Wiwa v. Anderson,
106
which were filed against Shell and the head
of its Nigerian operation, Brian Anderson, respectively were re-opened in New
York on 7 October 2008. It is
significant to know that Shell had attempted to seek an adjournment of the
case. The attorney from the Centre for Constitutional Rights (CCR), Jennie
Green, said that: ‘We are looking forward to finally bringing Shell into court,
where we will prove their role in the torture and murder of our clients and
their pattern of human rights abuses… It’s time for our clients and their
families to see justice’ (CCR 2008). And on 8 June 2009, it finally happened:
on the basis of the evidence against Shell, the company was forced to pay
US$15.5 million in compensation to the plaintiffs in an out-of-court settlement
(CCR 2009). The mayhem has been described by BBC as follows:
With oil prices at a 25-year
high, this should be a boom time for Nigeria’s oil capital, Port Harcourt but
it isn’t. Instead, the towns’s business is reeling with militant attacks on oil
installations, kidnappings and a general rise in lawlessness (Gregory 2006).
Shell continues to laugh all the way to the
bank. It makes about 13 per cent of its worldwide profits from Nigeria alone
and apart from USA; production in Nigeria is the highest globally (Okonta and
Douglas 2003).
The experience of the Ogoni people in engaging Shell and the
Nigerian state reflects how local, national and global social forces interact
to influence access, production and distribution of natural resources. It shows
how the state can be used by local and global forces of capital for private
gain in an era of globalisation (Obi 1997a:137).
More recent studies by Obi (2007, 2008, 2009) shed further
light on this account, focussing on the activities of the Movement for the
Emancipation of the Niger Delta (MEND) but looking more broadly at the factors
that drive and sustain the status quo in the Niger Delta area. The studies
reveal that mono causal models are inadequate descriptors of the ‘curse’ in the
area. Obi dissects the causes of the curse in the Niger Delta area into
historical and contemporary factors; local and international factors. Four of
them are particularly prevalent. Historically, the creation of the states and
the Biafran war and subsequent control of the Niger Delta by federal government
sowed the seeds of discord. The allocation of resources and the attempt to use
the Distributive Pool Account to undermine the derivation principle, whereby
states which contribute the most to the federation obtain the most from the resources.
The derivation principle – the percentage of the revenue from oil set aside for
the development of the area from which oil is drilled –
has been reduced from
50 per cent in 1966 to 13 per cent in 1999.
Attempts by the oil producing
107
states to get an increase through the
Supreme Court of Nigeria have failed. The situation effectively means that the
Niger Delta area, which produces the most of the oil of Nigeria, is the least
developed and gets the least oil revenue.
It is this injustice that has led to the formation of MEND,
to demand social justice. Obi (2009) shows that a key driver of the problem is
the issue of land. A policy of central control of land, which is locally owned,
means that the centre which is controlled by elites from the majority ethnic
groups, control the oil produced from the minority states. These four factors
are intensified by local (e.g. elites in the Niger Delta leadership), national
(e.g. officers of the state and the military) and global forces (e.g. oil
multinational corporations). The local forces have two faces, one for the
people and the other for their self gain. The national forces perceive the
struggles as attempts by criminals to bring the Nigerian economy to a halt.
Besides, they want to protect the oil companies which are influential even
within their countries. The multinational oil companies would do anything to
ensure their profits are secure (Obi 2008,
2009).
This complex interplay of factors cast doubt on the
one-size-fits-all analysis by neo-classical economists like Collier (2003:40),
who recently claimed that:
Every time a civil war breaks out, some historian traces its
origin to the 14th century and some anthropologist expounds on its ethnic
roots. Don’t buy into such explanations too quickly. …distant history and
ethnic tensions are rarely the best explanations of a conflict…look instead at
a nation’s recent past and, most important, its economic conditions.
Looking at the resource curse from a purely
economic perspective is unhelpful (see also Olarinmoye 2008). Why?
methodologically, the reliance on simplified statistical analysis with
simplified assumptions is problematic. The recent work of Alexeev and Conrad
(2009) has shown severe computational errors in the econometric work as well as
weak conceptualisation of the variables used.5 In any case, no one
monolithic explanation can suffice. At the root of the problem are questions of
self-determination and resource control (Obi 2008:430) and questions of
neglect, particularly of the youth in the Niger Delta area (Arowosegbe 2009),
but also of a general feeling that the wealth of Nigeria is not even invested
there but in foreign private banks. Because of this ‘volatile mix’ of factors
(Obi 2007), the statistical evidence cannot stand on its own. Rather, all
evidence of the phenomenon must be carefully studied, particularly taking
account of the differences in institutions and ideologies prevailing in
different countries.
108
Is Ghana Different?
Based on the liberal thesis of transparency,
one may argue that the Nigerian experience would not be replicated in Ghana,
because Ghana has better governance institutions compared with Nigeria’s
rankings (and many other oil rich African countries like Chad, Angola and
Congo). Ghana scores above the 50th percentile in the World Bank Institute’s
Worldwide Governance Indicator rankings based on rule of law, government
effectiveness, regulatory quality, and voice and accountability. Also, on
corruption, Ghana ranks 67 out of 180 countries in Transparency International’s
Global Corruption Report 2008 (Gary 2009:7).
It is useful to ask how valid this argument is. We may draw
some brief insight from Ghana’s experience with gold mining.
The abundance of gold in Ghana earned it the name, ‘Gold
Coast’. But gold mining has severely impoverished gold mining communities. The
majority of people in gold mining towns like Obuasi, Tarkwa and Akwatia are
landless, homeless, unemployed, poor and weak. Many have died as a result of
mining and the environmental impact has been devastating (Hilson and
Banchirigah 2009; Yelpaala 2004; Akabzaa and Darimani 2001).
Mining employs 15,000-18,000 people in Ghana, less than 1
per cent of the total labour force. Yet, the operations of only two companies,
Newmont Ghana Ltd and AngloGold Ghana Ltd., have displaced over 50,000 people
who have been poorly compensated
(Owusu-Koranteng 2008). A comprehensive study of the effects of gold
mining in Ghana undertaken by the Opera-
tions Evaluation Department (OED) of the
World Bank acknowledged, rather solemnly, that
It is unclear what its true
net benefits are to Ghana. Large-scale mining by foreign companies has a high
import content and produces only modest amounts of net foreign exchange for
Ghana after accounting for all its outflows. Similarly, its corporate tax
payments are low, due to various fiscal incentives necessary to attract and
retain foreign investors. Employment creation is also modest, given the highly
capital intensive nature of modern surface mining techniques. Local communities
affected by large-scale mining have seen little benefit to date in the form of
improved infrastructure or service provision, because much of the rents from
mining are used to finance recurrent, not capital expenditure (OED 2003:23).
Generally, the state has been directly or
indirectly endorsing these attacks on the livelihood of workers and the poor.
This was documented by Jim Silver in the most detailed work on this topic.
Silver (1978:67) noted that ‘the alliance of mining capital, the state and the
trades union bureaucracy which faces the
109
mineworkers has resulted in their
development of a militant class consciousness. ...[this] is a defensive
consciousness, disruptive, but not linked to any socialist transition in
Ghana.’ While Silver’s analysis is
dated, there exists some more recent anecdotal evidence of the ‘favourable’
role of the Ghanaian state to capital. For example, though the mining law
obligates the mining companies to pay royalties of between 3-6 per cent of the
value of gross minerals mined, the state allows mining companies to pay the
barest minimum of 3 per cent. Also, court cases against mining companies drag
for a long time, as in the case of forced evictions instituted by the people of
Nkwantakrom against AngloGold Ashanti, which has lasted 10 years and is still
unresolved (Owusu-Koranteng 2008). Also, a recent study by researchers from the
University of Ghana revealed that mining activities in Obuasi had created
dramatic levels of arsenic values, 10 to 38 times higher than levels permitted
by the Environmental Protection Agency (EPA) of Ghana and over 1,800 times
higher than the values allowed by the World Health Organisation (GNA 2008c).
This abuse of environmental standards has been allowed by the state.
Such devastation sometimes leads to protest by the mining
communities, often led by farmers who stand the risk of losing their farmlands.
In this regard, there have been protests in Obuasi and Asunafo North lately.
But, as noted by Owusu-Koranteng (2008), there is lack of organisation in many
mining communities, which has led to the emergence of some civil society
organisations like the Wassa Association of Communities Affected by Mining to
help in the organisation of struggles and protests against the mining
companies. Such struggles have pressured the companies to make minor changes in
their operations and have also created national awareness on the dramatic
devastation of mining companies (see Owusu-Koranteng 2008).
The evidence from the gold mining experience in Ghana may be
anecdotal, but it suggests that the Ghanaian state is not a ‘class’-neutral
state. Rather, it supports the interest of powerful groups such as
corporations. It suggests that there is a limit to which ‘transparent’ or
‘incorruptible’ or ‘governance’ models can prevent an oil curse. The liberal
analysis that corruption and opaque ‘deals’ are the root cause of the
devastation of oil is palpably flawed.
In any case, many of the root causes of the problem in
Nigeria exist in Ghana too. One crucial issue relates to the question of land
ownership - who is the owner of the oil resource: the people or the state?
According to article 257 (6) of the Constitution of Ghana, ‘Every mineral in
its natural state in, under or upon any land in Ghana, rivers, streams, water
courses throughout Ghana, the exclusive economic zone and any area covered by
the territorial
110
sea or continental shelf is the property of
the Republic of Ghana and shall be vested in the President on behalf of, and in
trust for the people of Ghana’. If it is government that owns land (defined as
water bodies and physical land) which contains natural resource wealth, then it
is unlikely that any special consideration will be given to the people in oil
communities. Indeed, clause 22 of the draft Petroleum Revenue Management Bill
stipulates that 70 per cent of the revenue from oil will be centrally managed
by politicians and bureaucrats (Akufo-Addo 2010).
From this perspective, the trickle-down idea begins to look
extremely shaky because there are insufficient policies to give particular
attention to the local communities. What about at the macro level: what social
policies are being developed to connect the oil industry to the public
interest?
Most of the laws about oil were enacted over two decades
ago, when Ghana did not have oil in commercial quantities, so there are fears
that most of these laws are not relevant.
For instance, the Fundamental Petroleum Policy of Ghana is believed to
be too vague about how the oil industry can be regulated (Cavner 2008). Also,
most of the existing laws such as the Petroleum (Exploration and Production)
Law of 1984 (PNDC Law 84) and the Petroleum Income Tax Law of 1987 (PNDC Law
188) were promulgated in the I980s when Ghana was governed by a military
dictatorship, so they were not subjected to broad public scrutiny,
parliamentary debates, discussion and approval (Gary 2009).
Further, as of 2009, there were no specific laws about how
emission standards and compensation for oil-related abuses would be decided.
There is currently a Petroleum Revenue Management Bill before the Parliament of
Ghana. However, according to Akufo-Addo (2010), a former attorney general of
Ghana, it is necessary to revise many of the clauses if an oil curse is to be
avoided. Yet, even before the Bill is discussed by parliament, there are clear
signs that the content will inform government budgeting, for instance. At best,
the government, using its majority in parliament, can rush the bill through the
house and get it passed into law, assuming that it wants to score political
points by not using a bill, instead of an act, to guide its policies (Akufo-Addo
2010).
These weaknesses in oil-related regulations have several
implications. First, they open up the
possibility that the oil companies may act in ways which are socially
suboptimal and environmentally degrading (Adu 2009). Secondly, they give the ingredients
for avoidable litigation. Take, for example, the oil activities in Ghana’s
exclusive economic zone (200 miles from shore), for which there are no clear
laws. Ghanaian laws are applicable to its territorial sea (12 miles from
shore), a subset of the economic zone, however, sections
111
of the zone are covered by Public
International Law (e.g. the Law of the Sea) rather than local laws (Allan
2009).
Meanwhile, the global interest in Ghana’s oil has soared.
Tom McCaskie (2008) was the first to raise the issue of the global interest in
Ghana’s recent oil discovery. In particular, he showed how the United States,
using the discourse of promoting USA-Ghana security relations, is keenly
interested in securing its share of Ghana’s oil under the auspices of a
military command for Africa (AFRICOM). Some of the leading companies in Ghana’s
young oil industry are Kosmos Energy,6 Anardako, the EO
Group, Sabre Oil and Gas, Tullow, Exxon Mobil Lukoil and the Ghana National
Petroleum Corporation. Although rising global powers such as China have not
been as dominant as the USA in Ghana’s oil industry, by financing
infrastructural projects such as energy-producing dams (e.g. the Bui Dam),
China is seen not to be a disinterested party in Ghana’s oil. But, again, it is
not only China and the USA that are interested in oil in the New Gulf: all
industrialised countries are seeking to move away from the Middle East-centric
focus in their pursuit of oil supplies (Mohan and Power 2009).
Since 2007, there have been at least 41 companies, from
different countries, which have applied for prospecting licenses. The approach
adopted by the Government of Ghana in dealing with these applications is to
negotiate with individual companies rather than use a competitive tendering
process. This method raises concerns about transparency and competitive
contracts (Gary 2009).
Other questions loom large: can Ghana absorb such revenues
without upsetting macro-economic stability? Will the oil industry being
established be linked to other sectors of the domestic economy or will it
operate as an extractive enclave industry primarily serving global interest?
Definitive answers are hard to find at this stage. There are
a few tentative statements that can be made, based on econometric studies. The
World Bank (2009) reckons that the oil reserves are not so large as to
structurally change the Ghanaian economy. Yet, it cautions that effort should
be made to remove the bottlenecks in non-oil sectors, such that they do not get
crowded out in a Dutch Disease scenario. Dagher and her colleagues (2010) have
reached similar conclusions. According to Breisinger et al. (2009), whether
Ghana will be plagued by Dutch Disease depends on how it uses the oil
resources, whether it invests in local communities and agricultural areas or in
urban and non agricultural areas. Moss and Young (2009) believe a Dutch Disease
scenario can happen in Ghana, especially if revenues are poorly managed.
Anything short of this and a Dutch Disease scenario becomes highly likely.
112
All in all, in the light of the evidence considered in this
paper, it is hard to be optimistic. There are weak regulations, little interest
in making special arrangements for local communities, the issue of ownership
looms, the issue of land revenue management is unresolved and transnational oil
companies are already scrambling for Ghana’s oil. Transparency – real or
rhetoric – is not sufficient.
Conclusion
In order to avert a potential ‘curse’ of oil
and turn Ghana’s oil into a ‘blessing’, the government of Ghana has called for,
and put in place, measures to promote anti-corruption and transparency. To the
government, these liberal measures are expected to unlock the blessings of oil
for all Ghanaians. However, the government overlooks crucial actors in the resource
curse problem, namely the oil communities and the multinational companies. To
what extent are oil communities catered for in government policy? Who owns
what? Who gets what?
The liberal analysis that mystifies the oil problem as a
‘paradox’ unsurprisingly leads to attempts to ‘throw light’ or be ‘transparent’
in order to demystify the ‘paradox’. However, it is more fruitful to see oil as
a part of the bigger agenda of capitalist accumulation – by expanded
reproduction and dispossession (Harvey 2003). The resource curse is complex, it
comes about and is sustained by transnational accumulation and dispossession,
mediated by various global, national and local factors. It follows that not
only are existing regulations weak but also the assumptions underpinning them
are shaky. On these bases, it is hard to be optimistic about the effectiveness
of the government of Ghana’s liberal solutions to avert the oil curse:
transparency and anti-corruption measures per se are unlikely to be sufficient
to cause the blessings of oil to trickle down to the poor, especially those in
the oil communities.
Notes
1. President
Kufour finished his term as president on 6 January 2009. He wasreplaced as
president by John Atta-Mills.
2. See picture
of banner at http://www.guardian.co.uk/business/2007/jul/30/oilandpetrol.news
3. Note that
‘good governance’ in this paper refers to transparency and zero tolerancefor
corruption.
4. Other
studies that generally corroborate the account above are Ifeka (2004),Turner
(1976) and Omeje (2004).
113
5. When they
correct the computational and conceptualisation errors, thereseems to be no
problem with resource wealth: it neither undermines institutions nor reduces
economic growth. It is ‘normal’ and there is no ‘curse’!
6. Its
expertise is oil discovery. After discovery, it typically sells off its
interestto other companies specialising in the ‘oil business’ (see Daily Guide 2009).
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