Ghana struggling to translate oil money into development gains

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Created on Saturday, 15 February 2014 00:00

Ghana struggling to translate oil money into development gains

03 February 2014

Infrastructure development remains slow, fuelling fears that the transformative potential of oil may have been overestimated

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Celeste Hicks

"We've taken the bull by the horns; this city is going to get a facelift" says Jacob Ntiamoah, deputy development planning officer with Sekondi-Takoradi Metropolitan Assembly. "We're going to dramatically improve the road network – there will be flyovers and a six-lane highway from Takoradi to the beach town of Busua."

Seven years ago, oil in commercial quantities was discovered off Ghana's southern coast, more than 93 miles west of Sekondi-Takoradi. Attracted by the city's existing harbour and airport, oil companies, service and exploration companies have flocked to set up headquarters, followed by tens of thousands of migrants looking for jobs.

Despite grand plans by the metropolitan authority, the dilapidated road network is still the talk of the town. "We spend a lot of time in traffic jams; it's not good for getting things done," says Abdul-Salam Mohammed from the NGO Global Communities in Takoradi. Roads that connect the harbour to the city, and the city to the coast and beyond – all the way to the border of Ivory Coast – continue to creak under the burden of increased traffic and heavy goods vehicles.

And while infrastructure development has been slow, the cost of living has surged. "Before the oil you could rent a decent room with a private bathroom here for 10-20 cedis, now the same room will cost you 120 cedis [£30.32]," Mohammed says. Similar increases in the price of land have also been reported.

But the city is looking better. Hotels, restaurants, shops and warehouses have sprung up, and there are more daily flights from the capital, Accra. For those who seized the opportunities to provide services for the arriving oil companies there has been a payoff. "The smart guys got in early and they really made their fortunes," says Ntiamoah.

Jobs have been created – UK-based Tullow Oil, operator of the Jubilee offshore platform, says that although the Ghana operation employs only 300 or so people, 86% are locals, according to 2012 figures.

Sekondi-Takoradi's fortunes are typical of the challenges faced by any government seeking to turn an oil windfall into lasting development. The country has been praised for its efforts to install a system of transparency to prevent the so-called "natural resource curse", which often seems to accompany extraction in poorer countries. But what is the link between transparency and development?

The 2011 Petroleum Revenue Management Act (pdf) guaranteed that payments by oil companies would be made public, as would details of what the government does with its share of royalties. The act allows for 30% of receipts to be set aside for savings; disposal of the remaining 70% is down to the ministry of finance, which is charged with choosing four priority sectors for development every three years.

In the first selection, Ghana's road infrastructure was identified as deserving of attention, along with agriculture, capacity building and paying off debts used to create the country's oil and gas infrastructure.

An innovative civil society body, the Public Interest and Accountability Committee (Piac) has been created, tasked with monitoring whether the money is being spent on development as well as seeking the views of local communities.

"Our recommendations for increased spending on education and infrastructure as development priorities came directly from the people, and I'm pleased to report that in the 2014 budget, the minister of finance is addressing these issues," says Major Daniel Ablorh-Quarcoo, head of the Piac.

Three years into production, many are beginning to realise that the potential for the oil money to deliver rapid development may have been overestimated. Initial expectations were that Ghana could produce 225,000 barrels a day, but that may not be achieved until the nearby TEN fields are brought into production, expected to be by 2016. Unresolved technical challenges, such as dealing with excess gas, have so far meant the Jubilee field has not produced more than 100,000 a day. Early projections suggested the country could earn up to $5bn (£3bn) by 2015; according to the Piac, however, the figure for 2010-12 is closer to $858m.

Oxfam America has been a keen supporter of the role civil society can play in shaping development. "People are very interested in whether the government is getting value for money for the plans it draws up," says Richard Hato-Kuevor, the charity's extractive industries advocacy officer. He worries that there are too many national development priorities: "There are more than 10 national road construction projects under way. The money is just being spread too thin.".

• This article was amended 4 February to adjust the quantity of oil expected from the Jubilee oil field.

Source: The Guardian UK