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31 August 2011 | Feature Article

Beyond the Rhetoric – pursuing transparency in the mining and oil sectors in Ghana

Global reforms in support of transparency in the extractives have gained momentum. This groundbreaking reform was given the boost when US Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010 to mandate all oil, gas and mining companies listed on the US Securities and Exchange Commission (SEC) to disclose payments they make to governments.

The G8 has followed suit. In Deauville, France, the G8 recently endorsed mandatory disclosure laws during its annual meeting akin to the Dodd-Frank law. José Manuel Barroso, President of the European Commission, in pursuance of transparency has committed to advancing legislation in Europe, with a proposal tabled by October this year. More to the reform, the Hong Kong Stock Exchange also requires disclosure of tax, royalty and other payments when oil or mining companies list on the stock exchange.

The costs associated with secrecy and opaqueness have informed resource-rich economies to rethink governance of their minerals and oil and gas sectors. The Arab political revolts that have seen leaders ousted have served a lesson to states that play at secrecy in the extractive sector. Oil without shred of any doubt has been a critical factor in these uprisings that started in Tahrir Square in Tunisia and quickly spread to the Middle East. Though Tunisia largely has no oil and Egypt with little, the broad issue of transparency in governance took the center stage. In Libya, Colonel Gadhafi's penchant to arm mercenaries toward buying social peace did not yield the result of perpetrating his rule. People were ready to trade off their democratic and political freedoms for the sake of realizing the economic benefits of oil.

What is Ghana learning from these impressive developments?

Newest oil state, Ghana seems oblivious of these current developments. Developments in the oil sector before and after commercial production are inimical. Not too long, security analyst, Dr. Kwesi Aning raised a concern of inflated oil and gas security budget. The expert in charge of Kofi Annan International Peace Keeping Centre on Joy News on April this year warned that some people may be taking advantage of the country's oil and gas security plan to steal money from the state. He was quoted as saying “while figures for the establishment of the Ghana Police Service Maritime Unit were reasonable, “and speak to the security challenges on the ground, the draft figures in the document called Oil and Gas Security Plan are way too high.” What is the said amount that is been hidden from the public? Transparency is far from reach in the country touted as holding the cradle of peace and stability in the African region.

As at now, Ghanaians are unaware of actual revenues the country is receiving from the oil. With numerous lifting of crude oil to the international market, revenues accruing to the state are still shrouded in secrecy. Though Ghana has earned the compliant candidacy of the Extractive Industries Transparency Initiative (EITI), practical transparency seems not a priority. The country is not living up to the mark of the EITI. It is no wonder ISODEC recently raised the alarm of shady deals in the oil sector. Contracts are awarded not on competitive basis but on grounds only known to actors in government. It has been revealed that governments oil contract with New York-based HESS Petroleum, has given HESS Petroleum a lower royalty rate of four percent as against five percent granted the Jubilee partners.

This is a stark repetition of dreadful mistakes Ghana made in the mining sector that millions of dollars in revenues are eluding the country. The accusation that the government is carving out a 2 percent interest in a contract it entered into with AFREN in a recent acreage assignment will always arise with the country ignoring open competitive bidding. The procurement law is silent on the issue of petroleum and mining contracts. When contracts awarding do not even follow the procurement law, the country provides room for rent-seeking and other corrupt practices.

In the mining sector, the issue is even more worrying. The secrecy that has shrouded investment contracts not subjected to the procurement law and signed by government with mining companies has faced severe criticisms.

The revelation that government has compromised its mandatory 10 percent stake in AngloGold Ashanti (Iduapriem, Teberebie and Obuasi), Newmont (both Ahafo and Akyem project), Noble Mineral Resources (Bibiani), in contravention of Section 43 (1) of the Minerals and Mining Act, 2006 (Act 703), gives cause for concern. These are immense revenues eluding the country that urgently need foreign loans to develop aside from the fact that giving out 10 percent stake contradicts the Acts of Parliament and cast doubt on the potency of governing laws of the country.

Kosmos Energy's public filing on the US Securities and Exchange Commission triggered the disclosure of oil contracts with the Jubilee Partners. However, there are some oil contracts hidden.

Ghana, considering recent developments, is fast becoming unconscious of the fact that success of oil is measured by poverty reduction rather than barrels of oil produced or millions of dollars received from oil exports. Transparency is widely the prerequisite for establishing proper institutional and regulatory structures, and for creating conditions in which abuses can be challenged. Transparency is undoubtedly important for addressing corruption in oil rich countries.

President Atta Mills on March 2009 made a declaration that all contracts with multinational companies be made public. This has not been a reality. It is significant Ghana moves above the rhetoric if oil will be a panacea for eradicating poverty and accelerating development. It is urgent that Ghana disclose all contracts it has with mining and oil and gas companies. This is to gain public confidence and extirpate unnecessary mistrust that breeds confusion and unrests.

It is incumbent on the government to publish all oil revenues that accrue to the country. The people of Ghana have the right to know how much the government earns from the oil industry. This will better inform them in holding leaders into account.

There is no gainsaying that most contracts negotiated provided too many deductions and incentives for extractive industry multinationals and too little benefits for Ghana.

Aside from the little benefits that accrue to Ghana, the investment contracts signed with foreign firms have been hidden from public oversight giving undue disadvantage to governments. The level playing field has not been created. The investment contracts have not been made public though they are negotiated on behalf of all Ghanaians. The people of Ghana are entitled to know the precise details and legal provisions that reveal obligations of the state and a company or consortium of companies as enshrined in these contracts.

Investment contracts should be disclosed for public discourse. Ghana cannot entirely give away its 10 percent stake in mining concessions. These contracts should be reviewed and reversed for the benefit of the economy. With this, Ghana would be joining countries like Australia, Tanzania, Guinea, Liberia and Zambia who have all either reviewed their laws or are in the process of doing so, to ensure that their countries benefitted from the current gold boom.

By: Stephen Yeboah. The author is a Senior Research Fellow at the Centre for Social Impact Studies (CeSIS), a research and advocacy non-governmental organization. He can be reached at [[email protected]]

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