At Agbogbloshie market in Accra, Ghana’s capital, Rose Kamina struggles to sell T-shirts in the stifling heat. “Business is small-small,” says the 22-year-old wearily. “This year we could only afford fowl for Christmas.” Then, unexpectedly, her face brightens a little. “But maybe next year we will buy a goat.”
As Ghana prepares to pump oil in the second half of 2010, hopes are rising, both among hard-pressed market traders at home and in the far-flung diaspora, where Ghanaians are quitting jobs in American banks to head back to an optimistic homeland. Oil was found off Ghana’s coast in 2007 and, even without further discoveries, is now expected to earn an average of $1.2 billion in annual state revenues for almost two decades. For a country with 23m people and a GDP of $16 billion, it could be a big boost—or a crippling blight.
Perky economic growth, a decent human-rights record and two consecutive changes of government by the ballot box have made Ghana one of the past decade’s success stories in Africa. In 2009 it won the accolade of being sub-Saharan Africa’s only country to be visited by Barack Obama as president. Yet some people worry that it could slip back into its corrupt and violent ways once the oil begins to flow: witness other countries in the region, such as huge Nigeria and tiny Equatorial Guinea, where cliques of “big men” have stolen stacks of bounteous oil money while most of the people have been left to live in poverty. This is the curse of black gold.
Ghana still has a good chance of getting it right. Unlike many of its neighbours, Ghana has struck oil under democracy. Its officials entrusted with drawing up legislation have been scrutinising oil-revenue laws from Norway to Trinidad and Timor-Leste. A draft bill proposes that part of the oil money should go directly into the national budget, with the rest split between a “stabilisation fund” to support the budget if oil prices drop and a “heritage fund” to be spent only when the oil starts to run out. Putting the money into ring-fenced funds should prevent a free-for-all among politicians and the corruption that could ensue.
But there are countervailing pressures. President John Atta Mills, who took office a year ago after a tense election won by less than half a percentage point, inherited a fiscal deficit of 14.5%, almost two-thirds more than the previous year’s. The former ruling party, it transpired, had embarked on a pre-election spending spree to woo voters. Because of Ghana’s recent record of good management, donors have helped out: the World Bank tripled direct assistance in 2009 and the IMF has agreed to lend $600m over three years. But Mr Mills has still had to cut spending, with a partial freeze on hiring in the public sector, the biggest employer. And the opposition says the government is creating mistrust by spending too much time weeding out civil servants close to the previous administration rather than preparing for petroleum.
None of this is endearing Mr Mills to the electorate. After an austere year the government may yet be tempted to blow its early oil revenues on restoring popularity. That would set a dangerous precedent; it would also be a lot easier if the government was not restricted by laws to stop it. For all the fine talk of heritage funds, the oil bills are behind schedule; none has yet been put to Parliament. “If you get the revenues before the laws, it will be very grey,” warns Moses Asaga, a member of the ruling National Democratic Congress who chairs Parliament’s energy and mining subcommittee. “Everybody will be struggling for the money.”
So decisions taken this year will strongly affect Ghana’s future. With proven reserves of just 1.2 billion barrels of crude (against Nigeria’s 36 billion), Ghana’s windfall may last only a generation. As Joe Amoako-Tuffour, a senior official working on the oil laws, puts it: “We must decide how many of these eggs to eat today and how many to keep and hatch into chickens. But we are a poor country and we are hungry. The temptation is to eat now.”
Source: The Economist