Monday, October 20, 2008

New wealth, fresh challenges

Beneath the promised wealth from Ghana’s oil find are challenges of equitable distribution of resources, infrastructural development and environmental degradation.

(Piece written for TELL Magazine, Lagos)

Abuesi, a small fishing town on the coast of the Atlantic Ocean in Ghana’s Western Region, is one community that is set to feel the influence of oil. Its 7000 inhabitants have lived off fishing since it was founded many years ago. The agile men of Abuesi and its sister community Aboadze, like many in Ghana and along the Atlantic coast of West Africa, are used to leaving their homes early every morning for the cold embrace of the sea. There they cast nets out of their wooden canoes in search of ever decreasing fish catches. But the lifestyle of Abuesi may soon change.

Last year, the government of Ghana working alongside Tullow Oil, Kosmos Energy, Anadarko Oil and E.O Group, all petroleum exploration companies, struck oil in commercial quantity about 140 kilometres off the shore of Takoradi at a place called the Western Cape Three Points in the Tano Basin. The government has been assured that there is between 500million and 1 billion barrels of oil under those waters.

The announcement of the oil strike in June 2007 was met with great joy and celebration by the whole country. President John Kufuor told the world that the oil find will transform Ghana into an “African tiger”. “Even without oil, we are doing great. With oil as a shot in the arm we’re going to fly”, he said. Many in Ghana hope that the finding of oil will bring great improvement to their lives, even as the country aims to become a middle income country by 2015.

Already there is excitement in the air about Takoradi, capital of the Western Region, as locals tell of the influx of foreigners into their town, land speculators and all who want to make a quick buck by investing in real estate, property and hotels. Doris Annan, a lady who runs the Silver Pot, a European style restaurant on Liberation Road in the strategic heart of the town. has observed a steady flow of strangers coming to inquire about business opportunities in Takoradi. But she does not know how to go about making use of the opportunities offered by the oil find herself. Many, like her, are unaware of the tremendous opportunities that lie in their backyard. For most respondents at the Market Circle, the heart of slow-paced Takoradi, their laxity towards the opportunities that the oil find is placing on their door steps is due to ignorance, because they feel, since they lack technical or engineering skills, they will not be able to function in the new scheme of things.

This is the major challenge before Kwesi Biney, mayor of Ahanta West, the district which governs Cape Three Points where the oil find was made. A former journalist, Biney says that Ahanta West is “potentially one of the richest provinces of Ghana considering the number of investments coming into the community”. These investments have been coming because Takoradi is mainly saturated with development hence Ahanta is the next destination of investors. There are already huge investments in the purchase of large plots of land by speculators who are hoping to resell to serious investors on the long run. In Ghana, lands are under the purview of the traditional leaders who keep it in trust for the community. Hence, he has asked them to report any such offers of purchase to him to ensure there’s a background check on interested buyers to see if they are ready to develop lands bought. Biney is also working at helping to develop the capacity of his constituents educationally to enable them take up jobs with the oil companies when the time is ripe. The Western Region is the most resource-rich region in the country producing 60 per cent of Ghana’s gold; 60 per cent cocoa; 25 per cent timber; 100 per cent bauxite and manganese; 15 per cent oil palm and 100 per cent of rubber. Biney observes that the region still suffers deprivation in terms of good road networks and social amenities. “It’ll be in the interest of the nation that this region is taken good care of if we should avoid situations in other parts of the world where the oil regions suffer deprivation”, Biney says.

That is necessary to create an enabling environment for incoming business concerns. The organized business community is already gearing up for the imminent oil boom. Yawo Agbesi, branch manager of the United Bank for Africa, UBA, Takoradi expresses the feelings of the banking sector. “Oil and gas is what is going to push business forward in the coming years”, he says as he targets the share of the unbanked 80 per cent of the city’s population. The subject of oil has also enticed the sensibilities of foreign insurance companies notably from Nigeria who have suddenly found Ghana as the next destination in their West African expansion strategies. In the last six months, about four major insurers from Nigeria have set up offices in Ghana to take advantage of the oil find. “We have the experience of oil in Nigeria so we want to find a way of participating in it”, says Ishola Akintunde, general manager of Equity Assurance, Accra, a recent entrant from Nigeria.

But with the joy and influx of investments comes some apprehension among many Ghanaians of the myriad number of problems oil has caused in other African countries notably Nigeria and Angola. Charles Tetteh, a well traveled music record seller at the Market Circle in Takoradi sums up the thoughts of many. “When I look at the condition of the Niger Delta (Nigeria), it’s a far cry from the benefits which it (oil) offers” he says. Like many other people, he hopes the government will enact laws that will make sure Ghanaians enjoy great benefit from the oil considering the fact that the exploratory companies are foreign-owned.

Apart from that, there is an undercurrent of agitation for an equitable sharing of the oil revenue. Ghana is a unitary state where all wealth gotten from every resource belongs to the central government which is then shared among the 10 regional governments and 138 local governments or districts as they are called. The central government holds onto the bulk of all revenue giving about 13 per cent to the district assemblies depending on the level of economic activity and level of deprivation. Nii Moi Thompson, economist and director of the Development Policy Institute, Accra, says it is very small because ultimately development occurs on the local level and not on the national level which is characterized by waste, vanity and theft. Thompson hopes that when oil starts flowing, 25 per cent of the national revenue will be given to the local districts to enable them build their capacity to ensure that more meaningful development takes place closer to the people.

Those are not the only challenges the government is facing as it seeks to protect its interests in the emerging oil industry. It also has to deal with in-fighting among the citizens as some communities have already begun a tussle over the ownership of the oil fields. One community is claiming that its name is not included in the appellation given to the oil basin. Thomas Manu, director in charge of Exploration and Production at the Ghana National Petroleum Company, GNPC, Tema, says no community can lay claims to the oil fields because they are offshore on the continental shelf, a place which is outside the purview of any village. Biney prefers to say that it is only a misunderstanding between the two communities and that it will be settled like the “brothers that they are”.

Among the many fishermen along the shores, there is a great clamour for the protection of their fishing grounds by the government. Since the coming of the oil exploratory companies on the shores of Cape Three Points, fishermen have found that the light from the oil platform attracts the fish away from their usual fishing grounds. The men have therefore found a veritable fishing spot by the rig side. The government has tried to alert the fishermen about the danger of fishing close to the rig. It has warned them that anybody caught fishing close to the rig will be prosecuted. A worried Nana Kojo Konduah, traditional ruler of Abuesi and chairman of the region’s association of canoe fishermen is one man who is aware of the great change that oil will bring to their lives. He has called on the other chiefs in his area to pressure the government into creating better opportunities for his people as their lifestyle goes through drastic change in the next two years when crude oil will begin to flow from the rigs. Though expressing happiness at the oil find as he hopes it will free Ghana from the clutch of fluctuating and ever rising world oil prices which has thrown the country’s budget into a spin, Konduah believes that fishermen along the shore need to be reassured via environmental impact assessment that their means of livelihood will not be totally disrupted. Not only that, he says there must be corresponding compensation from the government for the loss of their fishing grounds. “If they deprive us of our fishing grounds they have to give us something which our children can benefit from”, Konduah tells this writer at his traditional palace in Abuesi while flanked by two of his chiefs.

Closely related to that is the challenge of security on the open ocean. Ghana will need to protect its oil against illegal bunkering amidst unconfirmed claims by fishermen who say they have sighted ships on the seas carrying contents which they suppose to be crude oil. The Ghanaian Navy, George Asiedu, a Takoradi-based broadcast journalist, claimed, has in its fleet very old patrol ships. He should know, as he sailed on one of them, the GNS Yogaga, on his visit to the Jubilee oil platform run by Kosmos Energy and Tullow Oil. He says it took the naval ship 18 hours to arrive at the rig from the Sekondi Naval Base a distance which should not have taken more than three hours in a good boat. When the waters cannot be protected, Asiedu says, it will lead to the loss of the country’s resources.

Ultimately, Ghana faces a challenge to bequeath a lasting legacy to its people with oil wealth in this time of spiking world oil prices. It has heated up the December 2008 presidential elections with candidates already talking about how they will utilize the enormous wealth. Nana Akufo-Addo, candidate of the ruling New Patriotic Party, NPP, who estimates that the country will earn about $15 billion in the first five years plans to use it for developing agricultural potentials in the largely underdeveloped northern part of the country as well as to promote the manufacturing sector. John Atta-Mills, candidate of the opposition National Democratic Congress, NDC, has stated that he will make sure there’s a transparent management of oil revenues to enhance faster growth of the economy.

However, there are indications that, unlike other African countries, Ghana might be able to stem the potentials problems before the blow into the open. The government has tried to quell the anxiety of the populace by involving the whole country in the decision making process. It has tried to carry the people along during every inch of the process of engaging laws that will make the country not commit mistakes made by other countries. “The first thing we did was to call a forum where we called those with know-how to share with us their experiences the outcome of which was documented and taken round the whole country to enable people add their ideas”, says Felix Owusu-Agyapong, Ghana’s energy minister. This painstaking arrangement has made the government decide to toe the path of countries with best practices in the oil industry like Norway which has invested the bulk of its oil revenue in a $350 billion fund for future generations while avoiding the Dutch disease, the sole dependence on oil as a means of earning foreign exchange.

A lot of African countries have suffered the curse of oil, Ghanaians hope that theirs will be a different story even as their country has been hailed by the West as a symbol of good governance. The coming of oil will definitely test the strength of its 16 year-old democracy.