Two years after oil began flowing in Ghana, ordinary Ghanaians are wondering where the oil money is going. The government says there has not been much oil revenue coming in thus far, and analysts say the money that is coming in is not reaching the poor.
Like many Ghanaians, Julie Anum had expectations that oil production, which began in December of 2010, would bring about epic changes to life in Ghana. The 54-year-old housekeeper said Ghanaians like her thought oil money would bring about free electricity, free medical care and more jobs.
“Because we’ve been hearing from other countries that when there is oil, they have everything for free. If it’s been flowing for two years, then there should be a change,” she said. “There should be an improvement in people’s lives. Because you know we have so many in unemployment. So if the oil has started flowing, then they should employ more people to work on the field, the oil field and maybe in their offices. The ministry should employ many people.”
Vast reserves of oil were discovered in Ghana in 2007, and production began almost two years ago in the Jubilee Oil Field off Ghana’s western coast. In 2011, its first year of production, Ghana brought in about $444 million – which was half of expected revenue.
The oil revenue gets divvyed up between the national oil company to fund its share of operations in the field, an investment and savings fund, and then the annual budget funding amount, which can be used in the current year.
But Finance Minister Kwabena Duffour says Ghana has not yet been able to get enough revenue from the oil to bring about changes for the wider population. He says the revenue in 2011 amounted to about one percent of Ghana’s GDP.
In 2011, government documents show that some $167 million in oil revenue went into the annual budget – and only a percentage of that into social services.
Bright Simons, the director of Development Research at IMANI Center for Policy and Research, an Accra-based think tank, agrees the money has not been sufficient.
“The money that’s supposed to go into the funding of social services, etc, has been very miniscule compared to a… GDP of $38-39 billion,” said Simons. “You know, probably $13 million or so may have gone into the budget, into social services. That is clearly less than 0.1 percent. So when you look at the impact that oil money on social services has had over the last couple of years, its insignificant.”
The Finance Ministry projects that Ghana’s oil revenue will not increase significantly until 2014 or 2015 when production should reach peak levels.
Not a simple issue
Even then, economists say there are challenges to making oil production benefit the wider population.
Nicolas Depetris Chauvin, a senior advisor at the Accra-based African Center for Economic Transformation, says the greatest benefits to a local economy are seen when countries don’t just export a raw material, but process that raw good into other products.
“Think – the Arab countries. The Arab countries, when they discovered oil 90 years ago, they were exporting raw oil,” he said. “Now, you go to Saudi Arabia or to Dubai or Abu Dhabi and you ask them: Are you in the oil business? They will tell you no, no. I’m not in the oil business. I’m in the energy business. I’m in the aluminium business, I’m in the steel business. So they have used the fact that they have oil as a resource to develop other industries.”
Depetris Chavin says the problem is that Ghana’s oil is only predicted to last about 20 years, and it would take a long time to build up the infrastructure and capacity for new industries.
Another solution, Simons suggests, is for the oil companies to contribute to the local economy. He said they should buy local products and support local industry. Simons said right now even products like bread are imported onto the oil rigs, and only local elites are profiting from oil contracts thus far.
He and other analysts agree that as long as the oil industry continues to be an enclave industry with very few links to the community, it’s unlikely Ghana’ oil will benefit the poor.