Sunday 9 February 2014

The Oil Rich Nation and the Petrol Station

Oil has been a curse for Ghana. There is no doubt in my mind. There just does not seem to be anything right going on here – at least at the moment. Everything has gone a bit pear shaped since the start of the drilling of oil just a few years ago.
Let us revisit, briefly, the background arguments here. On the one hand, proponents of the resource curse are quick to draw attention to the circumstantial evidence, that is the things which seem to scream that natural resource extraction – in this case, oil – is causing more harm than good. On the other hand, there are those who contest that such outcomes are by no means inevitable as implied, and that the underperforming resource economy that tends to come to fruition is product of a number of things.

But whether coincidental or not, a lot of strange things have happened in Ghana since the drilling of its first oil. These ‘things’ can be grouped into two broad categories. There are, first and foremost, a series of rather odd phenomena which I believe could have been prevented but have surfaced solely because Ghana’s authorities have been enamoured with the country’s new-found oil wealth, turning what seems to be a blind eye to everything else economic. Problems have escalated but officials seem unphased. There is the rapidly-depreciating cedi which has long enjoyed relative stability, buoyed by what was a substantial amount of gold in the coffers. In less than a month, the cedi has lost 3.1% against the US dollar and at the time of writing, there were four cedis to the British pound. Then there is the rather bizarre recent change in attitude towards large-scale miners – specifically, an increased royalty payment from 3 to 5% of profits and, until the recent crash in the gold price, repeated threats of a windfall tax. I am all for African nations deriving more from their extractive industries but why did it take the better part of 25 years for the government to realize that its taxation scheme was highly-inappropriate? The move has, of course, had a significant impact on gold exploration, which is in danger of drying up completely. These concerns extend to the cocoa sector, long the trademark of Ghana and, until the explosion of gold mining in the 1990s, the country’s greatest source of export earnings. Prolonged neglect has led to the country plummeting to the embarrassing title of the world’s third-largest producer, behind Indonesia and war-torn Ivory Coast. Finally, there is the recent proliferation of Chinese in illegal mining, which has been really bizarre. You travel into some of Ghana’s rural areas and if you did not know it, you would think you were somewhere in China. It seems like every aspect of the economy is worsening and nothing is being done about it.

Then there is the second category of ‘things’, which concern the oil monies themselves, specifically, their misuse. There are the rather obvious ‘things’: the failure to institute any meaningful oil community fund, overlooking the needs of affected communities, the environmental impacts of drilling, reneging on promises of gas flaring, and the squandering of funds. But the biggest concern is this: where, exactly, is the oil money going? No one seems to no. I have heard several interesting – and at times, funny – stories over the years concerning this minister doing that and this MP doing this but nothing has really captured my interest. That is, until now.

Over the past year or so, I have heard several rumours about MPs and ministers constructing petrol stations and stockpiling them with natural gas and refined product originating from the Jubilee Field. It has been said that unmarked trucks would appear in both the middle of the night and broad daylight to replenish depleted supply. Is there any truth to these rumours? I had dismissed them until yesterday, when I travelled down the Accra Kumasi Road, along which it seemed as if there was a ‘Brand X’ petrol station every half mile, even in absolutely remote stretches. Yes, there is the occasional ‘Shell’ and ‘Total’ and Ghana’s own ‘Goil’ and ‘Glory Oil’ but these are sandwiched amongst a proliferation of stations with names you have not heard of. Some of these stations are still under construction but have operational pumps.

They say that Ghana is spending its oil money faster than it is earning it. It may be a case of the country’s politicians not really caring about concealing exactly how this is happening…