Oil Boom: Ghanaians Set to Avoid 'Dutch Disease'

Published on 28th April 2008

Since last year when Accra announced the discovery of offshore oil fields at its west coast, experts, civil society, bureaucrats, the media, academics, the global oil industry and ordinary Ghanaians have debated over fair sharing of the prospective oil wealth, poverty alleviation, accountability, transparency, sound macroeconomic management, good life and peace.

President John Kufour, focused on history and racing to better the late President Kwame Nkrumah in terms of development attributes and democratic growth, argues that the oil finds are under his watch, and will engineer Ghana into an "African Tiger." Kufour is drawing on global oil experiences to beat the dreaded “resource curse,” otherwise called “Dutch Disease,” that hinders countries from attending to other commodity sectors such as agriculture and manufacturing. 

More broadly, Kufour and his team are working to counter rentism (where natural resources are rented to foreign firms by the elites leaving a majority of the citizens poor) by making sure that oil revenues don’t find their way into the pockets of corrupt fatcats in Accra, a fault that has afflicted both government officials and oil firms that elect to pay bribes in most oil producing African countries.

The central issue is “transparency” and “accountability” in dealing with the complicated issue of being an oil producer in the face of Ghana being far below the United Nations Human Development Index (Ghana is at 135th position against 177 nations ranked in 2007), historically worrying and varied macroeconomic regimes, incoherent and lack of continued development agendas over the past 51 years, and struggling democracy against the backdrop of 21 years of mindless military juntas and 6 years of overpowering one-party regimes. 

Kufour’s “African Tiger,” though a bit exaggerated in terms of the expected 60,000 bbl/day production compared to Equatorial Guinea’s ( “Kuwait of Africa”) over 420,000 bbl/day, resonates with the broader imagination of Ghana emerging as Qatar, Kuwait, and Dubai. This is against the backdrop of West Africa’s new oil producing stars like Mauritania and Sao Tome and Principe. 

The forums are driven by the fact that more oil fields are being discovered day in, day out in a West Africa that is fast emerging as leading global oil and gas producer – from Angola to Mauritania, with prospective oil finds in places like Sierra Leone, Guinea-Conakry, Liberia and the Gambia mentioned in the Unites States’ Congressional strategic energy reports. 

The underpinning relevance of the Ghana oil find, African-wise is neither the fact that the finds are always increasing ( from the initial 250 million barrels to 600 million barrels and possible 3 billion barrels of oil boom projections) nor the fact that Ghana will in future produce oil at the level of Nigeria’s, sub-Sahara’s leading oil producer. The lesson is how Ghana’s emerging democracy has allowed its citizens to participate openly and critically in the oil debate without fear or reprisal from the government unlike other African states such as Equatorial Guinea. By doing so, a culture of transparency and accountability (key pillars of democracy and development ) is being enriched to contain the “resource curse” and “rentism.”  

This is reflected in one of the recent consultative meetings on Oil and Gas Policy that saw the Ghana Navy, student representatives, members of the Regional House of Chiefs, Labour Commission, National Commission on Children, security agencies and the media attending, among others, participating. Oil producing Africa has not seen such broad participation in deliberating oil finds from scratch. No doubt, Sheikh I.C. Quaye, Greater Accra Regional Minister, reflecting the feelings of Ghanaians, said that “Ghana’s oil discovery would be meaningless unless every Ghanaian benefited from the resource as well as its developments.” This prepares Ghana better to appropriate its oil and gas wealth for greater democratization and development. Equatorial Guinea did not hold such open debate before the production of its oil. Its oil windfall, under the brutal grip of the ruling Fang elites, has put the country under threat from the increasingly marginalized population who still live on US$2.00 a day despite the country’s oil income hitting well over US$1 billion yearly. 

A Spanish judge last week jailed Severo Moto, one of the main exiled opposition leaders, for attempting to smuggle arms to oust President Obiang Nguema Mbasago’s regime. This isn’t the first time, in 2005 Moto hired some European and South African mercenaries (including Sir Mark Thatcher, former British Prime Minister, Lady Thatcher’s son) to overthrow the Obiang regime with the understanding that Moto would give them US$1.8 million and oil rights. While the Equatorial Guinean case fits into John Ghazvinian’s Untapped: The Scramble for Africa’s Oil, where most Africans in oil producing countries do not benefit from their oil premium, the on-going oil debate in Ghana foretells different prospects in a climate of fast developing democracy with all corks of freedoms working. 

The implications of Ghana’s oil wealth benefiting ordinary Ghanaians’ well-being is informed by the country’s developing democracy and its consequent deepening decentralization exercise that has given Ghanaians greater participation and say, through an increasingly freer mass media, in its oil finds and its prospects. This isn’t the case in Equatorial Guinea, as Randall Fegley indicates in Equatorial Guinea: An African Tragedy, that had had long-running brutal autocratic rule, immense suppression of the mass media, violent human rights abuses, extreme tribalism, and fake democracy even up till today that is so bad that at a point one-third of its 520,000 people were either in exile or imprisoned, making the country get the tag “Africa’s concentration camp.”  

Oil boom in a democracy brings better development than oil boom in autocracy. As the Indian Nobel Prize winning laureate Amartya Sen argues in Development in Freedom,  development necessitates the unblocking of foremost sources of unfreedom – poverty, tyranny, “poor economic opportunities as well as systematic social deprivation, neglect public facilities as well as intolerance or overactivity of repressive states.”



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