GHANA’S OIL REVENUE-SPENDING OPTIONS

Originally Published, January 27, 2012

Governance and the distribution of wealth of a country are the two sides of the same coin. Among other things, the key function of governance has to do with creating and sharing wealth common to the people. Against this backdrop, revenue from natural resources of the country should be managed in transparent, inclusive and sustainable ways.

The horde of natural resources Ghana is endowed with; make our present economic plight indefensible. The country holds large reserves of a variety of minerals. The extractives sector of Ghana has been dominated for centuries by mining. Gold, diamonds, bauxite and manganese are commercially exploited, along with substantial resources of iron ore.

In terms of natural resources, Ghana is better endowed than Singapore, a country that sells nothing but services they render to other nations. Singapore does not have a drop of oil yet the country exports oil to other countries. Singapore has strategically invested in refineries with refining capacity of more than two million barrels of oil daily. They buy crude oil from oil producing countries, refine it and sell the refined product to other countries. Singapore do not have gold, bauxite, timber yet according to the “The Global Competitiveness Report 2011-2012, World Economic Forum”, Singapore is ranked first in the world as the city with the best investment potential. Singapore is among the top 3 in foreign trade and investment Competitiveness & Business Environment.

In terms of natural resources, Ghana is better endowed than Qatar. But Qatar, after finding oil invested in one strategic long term project called “Knowledge Based Economy ” which aims to contribute to the diversification of Qatar’s economy through building indigenous innovation capabilities and knowledge assets as it is applied in innovation and entrepreneurship, communication and information technology, product design and software, research, development and education. These are the key sources of sustaining growth in the global market. In 2010, Qatar was the fastest growing economy in the world – ahead of Singapore with a real GDP growth rate of 19.40 percent. Apart from Oil and Gas Qatar has no other resource. Yet, Ghana plays second fiddle to these nations economically. To explain this “abnormality”‘ we only need to look at how strategic and focussed our developement plans have been.

ACT 815 SECTION 21(3)
Having thoughtfully scanned over the developmental priorities as provided under section 21(3) of Act 815, of the Patroleum Revenue Management Act, it bears no indication to me that the country is ready to pursue new opportunities or new frontiers outside the mainstream. It spurs no innovation; even though that was what it was meant to achieve.
Interesestingly, the opening statement of ACT 815 sub section 21 (3) states:
Where  the  long- term national  development  plan approved by Parliament is not in place, the  spending of  petroleum revenue  within the budget  shall give priority to, but  not  be  limited to programmes or  activities relating to:

  • a) Agriculture and industry;
  • (b) Physical infrastructure and service delivery in education, science and technology;
  • (c) Potable water delivery and sanitation;
  • (d) Infrastructure development in telecommunication, road, rail and port;
  • (e) Physical infrastructure and service delivery in health;
  • (f) Housing delivery;
  • (g) Environmental protection, sustainable utilization and protection of natural resources;
  • (h) Rural development
  • (i) Developing alternative energy sources;
  • (j) The strengthening of institutions of government concerned with governance and the maintenance of law and order,
  • (k) Public safety and security; and
  • (l) Provision of social welfare and the protection of the physically handicapped and disadvantaged citizens.

It is very easy for any cursory observer to realize that the revenue collected since independence, -over the last fifty years- from cocoa, timber and the mining sector were all used for the same purposes stated in section 21(3) of Act 815. How much of economic benefits have acrued so far, to the people of this country? Is it going to be same old spending basket with regards to the oil and gas revenue? How are we different, in terms of development and living standards, from our neighbours who do not have a quarter of our resources? Mildly put, our economy remains under-developed, with a greater number of the people uneducated and poor; with agriculture, specially farming, remaining subsistence farming, with little mechanization.

Talk about health delivery; the doctor- patient ratio is appalling, our maternal health units are struggling to financially cope with labour complications and pregnancies, whilst child health units, theatre facilities for obstetric surgical interventions are not readily available.
Our local industries are dying. We import cocoyam, eggs, toothpick and tomatoes from our neighbors. Out of 187 Countries, Ghana ranks 135 on the UN Human Development Index for 2011, and 53.6% of its population lives on less than $2 a day.

The reason for the abysmal economic performance is obvious. Since the first republic the nation has not dared to think beyond the box; beyond the short-term. Plans and targets of succeeding governments have been geared toward short-term, populist, high sounding but less impacting projects. We have not carried out that kind of investment in a specific project which has the potential to radically turn our development fortunes around. Instead, we are using all revenue to maintian and service the old mainstream projects which produces short term results. But living in a country where there are ready made answers for every question, someone after reading this article, is going to expose my “ignorance” on the actual interpretation of Act 815. I am waiting.

Ghana now has Oil (which according to sector Minister Dr. Oteng-Adjei has produced. 16.7 million barrels, with Ghana earning 337.3 million dollars from its first three lifting’s of 2.98 million barrels between January and September 2011,) but instead of making the ordinary Ghanaian happy, a greater segment of the people are speculating over what change the additional resource like the Oil and Gas can bring to bear on national and human development. This is because there is no new thinking.

Therefore, the apprehension that greater sections of the population hold over the Oil and Gas deposit in the country, is justified. Considering our past performance, as a nation, with regards to the exploitation and utilization of our natural resources for national development, the synics cannot be faulted. The overall public estimation of the management of our natural resource is abysmal. The country still faces major challenges in the distribution of resource revenues for the public good.

THE OIL CURSE
Finding Oil and Gas in such greater quantity is a blessing, but stripped of it’s revenue generating accretions and adornments, the presence of oil resources in certain situations, may signify perennial danger lurking in the earth, waiting for an opportune time to strike. The oil revenue if not handled well has the tendency of dividing the people and becoming a source of conflict and political unrest. Therefore, Ghana signing up to the Extractive Industry Transparency Initiative (EITI) and the government’s interest to extend the EITI process from the mining sector to cover the oil sector is a positive sign of the country’s commitment to growth through transparent development of our recources. But this may not be far reaching enough.

REVENUE SPENDING OPTIONS FOR THE OIL& GAS
What we urgently need is a new approach to the spending prospects; on how to use the revenue accruing from the Oil and Gas. We should desist from the old approach of sourcing revenue from every thriving industry to support “survival” budgets which only meet the short-term needs of the nation. Policy makers and the technocrats of this country should design profitable management systems, pursue new opportunities and venture into frontiers outside the mainstream to lift the country from the economic quagmire we find ourselves in.

It is time, we as a nation, establish a creative engine; that is, to nurture a creative attitude and to look for innovative ways to develop our economy. How do we establish a creative engine for national development? We need to define a new Vision that will modernize the economy and improve the quality of life of the people. It is still early enough for changes to be made; for new ideas to be brought on board. I venture some of these ideas, with the hope that it will ignite passionate discussions on finding new ways for national development.

In the first segment of this article, I called for an urgent need for a new approach to the nations
spending prospects- on how to use the revenue accruing from the Oil and Gas. I suggested we desist from the old approach of sourcing revenue from every thriving industry to support “survival” budgets which only meet the short-term needs of the nation.

Policy makers should consult technocrats of this country on how to design profitable management systems, pursue new opportunities and venture into frontiers outside the mainstream to lift the country from the economic quagmire we find ourselves in.

I suggest that we commit ourselves to a new course of action by making long strides- national decisions that will not only modernize our economy but will also raise the living standards of our people. I suggest the following decisions for consideration.

SPATIAL IDENTIFICATION
What will an effective spatial identification do to our national economy? It is time to research the issue, to find its cost -benefits. For example, let us dedicate some percentage of the Oil and Gas money to embark on effective spatial identification- house address system and street names in the country over the next ten years. This project if done, shall impact positively on the general economy of the country. It shall introduce efficiency in service delivery; engendering innovations in the delivery of services in the country. This will be aside of the employment the exercise is likely to generate.

Imagine the aid it shall offer security agencies in their work and help to combat and reduce crime, the ease with which both driver and vehicle registration could be done. Talk about the issuance of national identification, and verification of personal documents. It has benefits for the tourism industry as well.

The benefit to tax collection and the simplification of data collection cannot be over emphasized. The phantom population-people, who cannot be traced to any specific screws, will vanish overnight. The economic benefit to derive from the consolidation of personal data alone should warrant the project.

RENEWABLE ENERGY SOURCES
Again allocating money from the Oil and Gas revenue specifically to solve the perennial shortage of electricity of the country shall help the country embark on an industrial revolution. No country in this age shall be able to run its economic wheels effectively without having a consistent and reliable energy supplies.

An uninterrupted electricity power supply, for example, shall impact every facet of the national economy i.e., educational institutions, industries, hospitals, road and train transportation, agric, effective policing, scientific research centers etc, etc. We urgently need to expand and increase our capacity in electricity production. Let us use part of the Oil and Gas money to explore renewable energy sources such as biomass, solar, wind and small hydro to support our electrical energy supply.

RESTORING GHANA AIRWAYS
Already, the discovery of petroleum has brought a lot of invigoration in business. The key to business is effective transportation and communication. Whiles so much is being done to improve telecommunications, nothing seems to be done to resuscitate the national airline, even though air transport is the most efficient in business facilitation.

Let us use part of the Oil and Gas money to purchase two or three aircrafts for the nation. With the oil boom, a lot of Aircrafts from other countries have decided to run our airspace. The Ghana Airways must be restored immediately not just for a national pride but to do serious business. Building some more international standard airports in Accra, Kumasi, Takoradi, Tamale, Suyani, and Ho will be economically wise.
.
MEDICAL TOURISM DESTINATION

Medical tourism is proving to offer better stimulation to national economies, in the long run, than the traditional recreation. Let us use part of the Oil and Gas money to make Ghana, a Medical tourism destination to provide healthcare facilitation services to individuals, insurers and corporate organizations with the assurance of cost benefits and quality experience. Let us improve, expand and where not available establish, clinics and specialist centers using part of the oil revenue

The immediate spill over benefit from such investments will be rapid specialization in the training of the nation’s medical corps in the areas of service. As a nation we can reasonably consider the following areas for starters; Thoracic/Vascula Surgery , Rheumatology, Spinal Surgery, Urology, Vascular Surgery, Dentistry, Dermatology, Endoscopic Surgery, ENT Surgery (Otorhinolaryngology) Gastroenterology, General Surgery – for abdominal surgery, Haematology, HIV/AIDS management, Interventional Radiology, Maxillofacial and Oral Surgery – surgery of the bones of the face and mouth, Neurology, Neurosurgery, Nuclear Medicine, Obstetrics and Gynaecology, Oncology, Orthopedic Surgery, Orthodontics and Prosthetics – correction of teeth malformation, Paediatric Surgery, Periodontics – disease of the gum, Plastic and Reconstructive Surgery, Trauma Surgery. Let us expand our medical school to allow more intakes of students.

INTER CITY RAILWAY SYSTEM
We must as a matter of priority, redo our rail system to incorporate the latest technologies and to expand our rail lines. It is high time we broke away from what was built by the colonialists who connected only the mine and timber centers to the sea ports. It is not late to have inter- city and within-city rail system to help commuters to and from work. Apart from bringing comfort and ease to our hard working people as they work to propel the wheel of the national economy, it will ease congestion on our roads and reduce our dependence on oil and gas to power our vehicles.

The nations we make reference to in our public discourse, as having gone ahead of us, at one time in their national history, took bold decisions to pursue new visions. They sought excellence in one or two strategic areas of endeavor to spur their national development. The strategic goals cast, determined their spending priorities and spending options.

The marginal status of our national economy notwithstanding; and inspite of the over whelming majority of our people living in abject poverty; it is never too late to start acting. In fact, these must motivate us to emulate those who have blazed the path and made it.
Let us consider the American experience that served as catalysts to industrial development for inspiration.

A GREAT NEW AMERICAN ENTERPRISE
On May, 25th 1961 President J. F. Kennedy made a speech before a joint Session of Congress on putting a man on the moon to explore scientific and economic benefits of that planet. J. F. Kennedy called this project “The Great New American Enterprise.” Upon acceptance by congress, this strategic goal cast, determined the spending options and spending priorities of America’s revenue. Greater percentage of America’s revenue was diverted to this project due to its future economic benefits to the course of human life on earth. They gave themselves a decade to achieve this goal.

BENEFITS OF APOLLO 11
What has been the long-term economic value of the spending on the Apollo program?
In addition to the enormous knowledge that space exploration has already delivered, space technologies have become integrated into everyday life so deeply that modern society could not function without them.

Weather, telecommunications, environmental analyses and national security are only most obvious space technologies that humanity relies on, which is taken for granted. The fact still remains these are spinoffs and transfers from space to non-space sectors provide many additional indirect benefits.

Putting a man on the space has produced much more than communications, which in itself is a major positive spinoff. We now have the benefit of the Global Positioning System (GPS) which is a navigation and precise-positioning tool. originally designed to aid the navigation of the space craft, military in their defense capabilities, today the uses of GPS have extended to include Military uses, as well as for Commercial and Scientific applications. GPS Today, plays an important role in the earth sciences; Meteorology, for weather forecasting and global climate studies; in geology as a highly accurate method of surveying and in earthquake studies to measure tectonic motions during and in between earthquakes. Hospital equipments and medical research centers have benefited immensely from the lunar exploration.

The mobile phone and the microwave are the most popular spinoff benefits of that single premeditated decision to spend on one viable project that in turn shall drive the national economy.

CONCLUSION
It is time to think differently now from the old ways we handled the destiny of this country. Ghanaians deserve better living conditions than we are in now. Our present national character symbolized by ignorance, illiteracy and poverty, is a shameful indictment to our politicians and technocrats giving all the resources we have.

Let us stop the 24/7 “Accra politics” of the president being sick even though he has never failed in executing his mandate, a presidential candidate being short in height and having a third class degree as if the qualification of being a president in Ghana is to be a (nephilim) giant. Let us stop the pedestrian view of amateur politics which suggest that if it doesn’t rain in Kumasi, it demonstrates an act of divine anger and disapproval of the ruling government.

Our newspaper archives are replete with governments’ proposals of good intentions and promises which never materialized, some dating back fifty years. It is time to examine where we are wrong and where we are not, where we may succeed and where we may not. Let us note, at this juncture that nations are not built on good intentions, but on the delivery of innovative, future-focused strategic plans. Let us be committed to programs that will streamline and accelerate national development. We urgently need a new approach to the spending prospects, management and how to use the revenue accruing from the Oil and Gas by dedicating ourselves to projects that will have a long term effect on the economy. This is a choice which this country must make. This is a judgment policy makers must make.

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