Petroleum Revenue Management Bill

The oil find comes amid high poverty levels and debilitating infrastructure in Ghana - the beacon of democracy in the troubled West Africa.

With the hope of huge revenues from oil and a goal of middle-income status in the near future, Ghana's eyes are focused on how to develop as quickly as possible.

This led to its parliament passing the Petroleum Revenue Management Bill on March 2, which looks at how the revenues will be shared and how the possible corruption - that characterizes mining in Africa - can be mitigated.

The big news in the Bill is that it opens the door for Ghana to borrow the huge amounts needed for infrastructure development, while using oil revenue as collateral. The country has an annual infrastructure deficit of $1.6 billion.

Ghana's Deputy Finance Minister Fiifi Kwetey has said that the government signed a $13 billion with Chinese financiers in September 2010. The money is aimed at funding energy, agriculture and transport projects.

The new loans, according to reports by international news agency, Reuters, include $3 billion from the Chinese Development Bank to finance Ghana's oil and gas infrastructure and agricultural development, plus $9.87 billion, signed with Chinese Exim Bank, for road, railway and dam.

Mohammed Amin Adam of Ghana's Civil Society Platform on Oil and Gas said the ability of Ghana's economy to soak up the loans has to be looked at again, because it constitutes "an important determinant of the annual budget support."

"The failure of the economy to absorb both the petroleum revenues and loans contracted by the government on the back of collateralized petroleum revenues could likely lead to 'Dutch disease' effects and other macroeconomic slips, and thereby make Ghana a convenient candidate for 'resource curse'," he writes in a detailed assessment of the Bill. The Dutch disease refers to a phenomenon when the discovery of a natural resource raises the value of that nation's currency, making manufactured goods less competitive with other nations, increasing imports and decreasing exports. The term originated in Holland after the discovery of North Sea gas.

"The fear of heavy indebtedness associated with high appetite for borrowing in resource rich countries, the weak public financial management system in the country and the persistent large fiscal deficits may weaken the resilience of the economy under a collateralized petroleum revenue regime," Amin notes in the paper.

He said that is perhaps why Ghana needs a long-term national development plan to guide spending priorities, the pace of spending and to match the economy's absorptive capacity with resource needs.

But Amin lauds the Bill as "refreshing" given its emphasis on transparency and accountability, alongside what looks like the empowerment of citizens to fight corruption. Citizens now have the legal basis to demand transparency and accountability and also monitor the compliance with the bill by government, parliament and the national and international oil companies, Amin writes in the assessment.

Part of Tullow's responsibility, according to its website, has been to provide the people of Takoradi with water wells and water storage tanks, schools and improved fishing. But the people want compensation for the drilling on their land. Takoradi Member of Parliament Kwabena Okyere Darko Mensah and his colleagues filed an amendment in February to the Petroleum Revenues Management Bill passed in March, calling for 10 percent of the petroleum holding fund generated from the western region to be given back to the Western Regional Development Fund.

The amendment was rejected but it is clearly an area the government needs to take into account in the days ahead.

(Reporting from Kenya)