TOPIC: DEMOCRATIC POLITICS:

AN ASSET OR LIABILITY FOR AFRICA’S OIL/NATURAL

RESOURCE GOVERNANCE 

E. Gyimah-Boadi, CDD-Ghana; Afrobarometer; University of Ghana SOAS, University of London, in partnership with CDD-GhanaGovernance for Development in Africa: Residential School

06-10 May 2013Accra, Ghana

Funded by the Mo Ibrahim Foundation

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Ghana as “an oil & gas country/economy” (2007-) Kufuor-NPP admin announced the discovery of commercial quantities

oil in 2007 – coinciding the Golden Jubilee anniversary of Ghana’s independence

The Jubilee Oil Field located at Cape Three Points off the west coast of Ghana holds reserves of approx. 4.5 billion barrels of oil;

Jubilee Oil expected to yield about $1million a year for about 20 years Main oil producers – Tullow (Anglo-Irish, Cosmos (US) Production begins in December 2010 under Mills-NDC admin. Under 100,000 barrels in December Dec 2012, expected to peak at

about 12,000 bpd Legal framework: Petroleum Revenue Management Act (Act 815)

2011(Ghana Petroleum Funds/Heritage Fund, Stabilization Fund, Public Interest and Accountability Committee, etc

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Two propositions about democracy and Ghana’s

natural/oil resource governance Proposition 1: “Ghana’s oil is likely to be well-

governed (i.e., “developmentally” governed) because it has come after the country’s emergence as a democracy.” (Ghanaian policy elites, following A. Sen, 2000; Goetzmann, 1999)

Proposition 2: Ghana’s oil is likely to be badly governed (i.e., governed “anti-developmentally”) because the country is a democracy.” (à la Adrian Leftwich, 2007; Paul Collier, 2006)

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When is governance of a community resource/public

asset “good”? The resource/asset is governed in a

manner that conduces to the public good;

Those in charge of governing the

resource/asset are doing so principally in the interest of the public, producing public goods, etc.  

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When the governance of a positive natural resource/oil/public asset is

“Problematized” … Posed as a challenge to be addressed or question to be answered, we may ask: “to what extent is the state/government/public authority in charge of governing oil, a natural resource, or public asset, etc. resisting ‘the universal predisposition of power holders everywhere to use state power for their own ends, rather than for the public good; for ruling parties to become vehicles for and transmission belts of ethnic or regional blocs or patron-client networks, or of influence peddling chains of what Ghanaians aptly call ‘connections’; and for state-owned enterprises and public services to become a source of ‘job for the boys’ and income and services for party bosses, the party faithful and their friends and family’”? Maxwell Owusu, Uses and Abuses of Political Power: Continuity and Change in the Politics of Ghana (University of Chicago Press/Universities of Ghana Press)

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Key institutions and processes necessary for good governance

Key institutions for good/developmental governance include: Rule of law institutions/courts, ombudsman, etc.; Public accountability institutions - including anti-corruption and

supreme audit bodies, perhaps, technically strong legislative institutions;

Efficient state bureaucracy/professional public service, including central bank, finance ministry, planning statistical/planning/policy analysis bodies, supreme audit service, etc.,

However, for governance institutions/processes to be of good quality/usable, they must be efficient, staffed by professionals, recruited on the basis of merit, adequately-remunerated and resourced, operationally independent/insulated from political and societal pressure (Gyimah-Boadi and Van de Walle, 1996)

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Processes/institutions of democracy

Modern democracy defined as:A “system of governance in which rulers are held accountable for their actions in the public realm by their citizens, indirectly through competition and cooperation of their elected representatives.” (Philippe Schmitter and Terry L Karl, 1991)A democratic system of government has three pillars. They are:a. “rule by the people,”b. “accountable to the people” (i.e, “rule for the

people”)c. “rule under law” (i.e., the rule of law)

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Key democratic processes and institutions for voice,

accountability and rule of law Institutions to ensure free, fair and regularly scheduled elections

in which the incumbent is not guaranteed to win; Representative bodies/legislatures, ideally with a strong

opposition to countervail the executive branch; Institutions and processes such as media, especially, when

independent, to enable citizens to express their views in addition to and in between polls;

Institutions to ensure governmental transparency, including independent media, protect the independence of journalists, and enable citizens to access official information;

Rule of law institutions/courts, ombudsman, human rights bodies, etc., (to keep government and officials “bounded,” protect citizens’ rights, adjudicate, etc.);

Public accountability institutions, including anti-corruption and supreme audit bodies, public accounts committees of parliament;

However, for democratic institutions to function effectively, they must enjoy constitutional, legal and operational independence, must be well resourced, technically competent, etc.

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Democratic institutions/processes and

good governance: what links? Some of the democratic institutions and processes

(such as free and fair elections, representative legislatures, media freedoms, etc. ) are not necessarily required for good governance to occur.

But others (such as the rule of law, governmental transparency, accountability and responsiveness, etc) are prerequisites for good governance.

And just like the governance institutions/processes, democratic institutions/processes must also have quality and depth to deliver “democratic outcomes/goods”.

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Democracy as an asset and a liability for Ghana’s oil sector

governanceDemocratic oversight/resistance: the involvement of civil society/media/general public in Ghana’s oil management CSO, media, independent experts,

traditional chiefs, especially Civil Society Platform for Oil and Gas (CSPOG) provided to MPs/Parl. and put pressure on govt. for “best-practice” oil and gas management legislation;

CSOs included in Public Interest and Accountability Committee (PIAC), involved in over-sighting oil revenue management, etc;

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Contribution of CSOs, public, independent experts in oil governance: Popularized the notion of “resource curse”; induced

parties/candidates in recent national polls and induced ensuing governments to express commitment to transparent, prudent management, equitable management (aka developmental governance) of oil and gas resources/revenue; Democratic checks and balances;

An important source of home-grown democratic checks and balances - particularly necessary in the wake of the waning importance of IFIs, Western assistance, rise of China/other non-traditional partners, and the global commodity boom.

Democracy as an asset and a liability for Ghana’s oil sector

governance

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Democracy as an asset and a liability for Ghana’s oil sector governanceLimits to civil society/media/general public democratic oversight/resistance:

Limited CSO/media/lay understanding of the entire petroleum value chain;

Limited CSO access to/appreciation of existing and new exploration contracts, sub-contracts and licences.

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Marginal success in advocating for better regulation sector (e.g, GNPC’s industry operator and regulator roles in Ghana’s petroleum sector); but

Limited CSO/media capacity to compel oil/gas contract and licensing transparency in upcoming legislation, get oil investment strategy published;

Limited capacity to monitor/scrutinize government petroleum revenue forecasts, GNPC and Ghana National Gas Company activities, income, and expenditures, etc.

Democracy as an asset and a liability for Ghana’s oil sector governance

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Democracy as an asset and a liability for Ghana’s oil sector governance

Limited CSO capacity to organize dialogue on local content; monitor local content fund, procurement of local petroleum service contracts; or engage with the Ghanaian private sector/AGI to better understand the sector’s capacity and needs; or engage with international and national oil producers/service companies to better understand contracting needs; etc.

CSO sustainability questions linger as “free rider” and other coalition challenges remain unaddressed, and the CSOGP remains donor (mainly Oxfam, World Bank) supported;

CSOs/media susceptible to government, partisan, and private actor cooptation. Electorate vulnerable to vote buying and ethnocentric/sectarian appeals.

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Democracy as an asset and a liability for Ghana’s oil sector governance

Parliament/Parl. Committee involvement in democratic oversight/resistance:

Parliament (Legal and Constitutional, Subsidiary Legislation, etc Committees) has been involved in the establishment of legal and institutional framework for oil/gas governance.

Parliament (Finance, Public Accounts Committee, Mines and Energy, Local Govt and Rural Development, Social Welfare and State Enterprises, etc Committees) involved in over-sighting oil/gas governance processes/institutions.

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Democracy as an asset and a liability for Ghana’s oil sector governance

But parliament not proactive; key Parliamentary Committees led by ruling party; voting on oil issues has proceeded along party lines (as in ‘competitive clientelism’ not liberal democracy);

Parliament yet to develop a sector-wide strategy for oil and gas backed by a credible strategy of parliamentary oversight;

Weak ability to scrutinize audited Ghana Petroleum Funds, GNPC accounts; organize public hearings for additional info, etc;

Unable to use its oversight and representative functions to address social and environmental issues in oil (Western) region

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So has democracy been an asset and a liability for Ghana’s oil sector governance?

Ghana’s record of peaceful electoral turnover may have increased foreign investor confidence in Ghana to make long term investment decision;

The legal framework for oil management (PRMA Act 815) is superior to the PNDC era one that governed GNPC;

CSOs/media actively monitoring oil sector governance; But NPP-Kufuor motivated to accelerate commencement of

the commercial exploitation of oil ahead of 2008 polls and ahead of sector legal and institutional framework;

Grandiose election promises without regard to the unfolding global financial crisis (e.g, NDC’s one-time payment of NHIS premium in 2008; NPP’s free basic education in 2012).

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Democracy as an asset and a liability for Ghana’s oil sector governance

Prospects for vertical accountability (popular pressure), sound policy debate and pragmatic solutions to challenges of oil sector governance undermined by intense, intimidating, ethnicized/negative NDC/NPP election 2008 and 2012 campaigns, hyper partisanship, winner takes all politics;

Key oil and gas sector governance institutions undermined by politicization, partisan appointments aimed at servicing incumbent party patronage networks and election campaign resource mobilization (hence presidentialised governance shaping secrecy around Production Sharing Agreements (PSAs), contracts, licences and procedures; public-private partnerships, local content benefits, etc ).

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Democracy as an asset and a liability for Ghana’s oil sector governance

Reflecting Ghana’s status as “competitive clientelistic” democracy, low quality/electoral but not yet liberal democracy: Governance of Ghana’s oil is is personalized, shaped by nature

of the ruling coalition Resistance to following best practice (e.g., oil flows before

regulations are in place; Petroleum Exploration and Production Bill yet to be passed, and content likely to be inadequate)

Best institutional practice on paper, but non-compliance in practice (e.g., Revenue Management Act, but used oil as collateral for borrowing and forward spending); Public Interest and Accountability Committee (PIAC), but insufficient teeth; Petroleum Commission Act passed, but GNPC still active as sector regulator and acting as an exploratory partner in production); Payments into the Ghana Heritage Fund and Ghana Stabilization Fund not followed as mandated by Petroleum Revenue Management Act 2011 (815).

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Conclusions Democracy has been, at least, in part an asset

to Ghana’s oil and gas sector governance. It has also been an impediment to the

governance of Ghana’s oil/gas sector. The quality and depth of Ghana’s democratic

(just as its governance) institutions and processes is weak.

Therefore, to foster “developmental” governance of Ghana’s oil, improve the quality of Ghana’s democracy.