Two-Pronged Approach To Maximising Ghana’s Oil Benefits
By Samuel K. Obour
Despite the general optimism that has characterised oil expectations among Ghanaians, there have been snippets of pessimism among a cross-section of society. Genuine fears have been raised, that oil may end up benefiting only the elite in society. Ostensibly, some chiefs and people of the Western region were wary in this regard, hence their petition to Parliament in November 2010 that 10 per cent of Ghana’s annual oil revenue be committed to the development of that region. And their fears are not unfounded:
A map showing Ghana's offshore oil
The country has exported gold, diamond, bauxite and other precious minerals for decades, but revenue from those resources have hardly benefited ordinary Ghanaians. Indeed, poverty is even more pronounced in some areas where gold and diamond are extracted. With oil, the situation is even bleaker:
First, no African oil country has successfully maximised oil benefits in the interest of her citizenry. Countries such as Nigeria and Angola have exported billions of barrels of oil for many decades, earning billions of dollars in revenue; but majority of their citizens live in poverty. In the case of Ghana, our estimated oil reserves of about three billion barrels is small, relative to Nigeria’s 37.5 billion, Libya’s 47 billion barrels and Angola’s 13.5 billion barrels of proven oil reserves. As such, whereas Nigeria exports about 2.3 million barrels of oil per day and earns about $60 billion per year, Ghana’s daily oil export stands at about 85,000 barrels per day, and the best estimates have put the country’s expected oil revenue this year at $1.3 billion. Though significant, this amount may be incapable of facilitating the rapid development many Ghanaians crave.
Already, there are reports that villagers in the western coastal areas nearest to the oil fields are complaining about rising costs of goods and services, pollution of water bodies, fishing restrictions and a lack of opportunities in those areas. The situation becomes even more worrying when one considers the fact that jobs in the oil sector are reserved mainly for foreign expatriates and Ghanaians with the best educational qualifications and technical skills. A fundamental question thus arises: How does Ghana maximise oil benefits in the interest of her citizenry?
Two-pronged approach Maximising Ghana’s oil benefits in the context of this article is simply utilising oil revenue judiciously for the long-term socio-economic transformation of the country. This transformation will be evidenced by drastic growth in Ghana’s GDP and Income per capita; reduction in unemployment and poverty levels; food sufficiency; growth of local industries; and a general improvement in the standard of living of Ghanaians. In the opinion of this writer, Ghana must prioritise and pursue a concurrent improvement in education and agriculture as a two-pronged strategy towards achieving the foregoing objective.
Education: Illiteracy is a major economic bane for Ghana, as it is directly responsible for poverty and unemployment among millions of Ghanaians. Data from the Ghana Living Standards Survey Report of the Fifth Round (GLSS 5), September 2008, indicate that about 31 percent of adults (representing a little over 4 million people) have never been to school. A further 17 percent (representing 2.3 million people) attended school but did not obtain MSLC/BECE certificate. About 39 percent of adults (5.1million people) have the MSLC/BECE certificate and only about 14 percent (1.8 million adults) obtained secondary or higher level qualification. Thus, about half (6.4 million) of adults in Ghana neither attended school nor completed middle school/JSS. The implication of the preceding is that many non-literates can neither take advantage of the opportunities in Ghana’s thriving private sector nor secure manufacturing jobs due to the country’s lack of industries. Education is an economic imperative: No country achieved economic development without educating its people. From the US, where literacy stands at 99 per cent and Australia (99 per cent) and South Korea (97.9 per cent) and China (92 per cent and Brazil (88.4 per cent) to South Africa (86.4 per cent), human development preceded economic development.
In Ghana, education is weakest at the basic level where tens of thousands of students annually fail to secure admission to Senior High Schools (SHSs) and Technical Institutions (TIs). This year, an astonishing 53.07 per cent of candidates who sat for the Basic Education Certificate Examination (BECE) failed and are not eligible to attend SHSs and TIs in the country. To facilitate the sort of development that will help alleviate poverty on a wide-ranging scale, a significant portion of Ghana’s oil money must be expended on revolutionising education in the country. Emphasis should be on improving education at the public basic level, especially. A drastic improvement in the quality of teaching, the aggressive development of educational infrastructure, and the institution of effective supervisory mechanisms to ensure that educational personnel do the right things, are some issues Ghana could consider.
The country’s educational programmes must be reviewed and adjusted to meet the demands of the modern world. Programmes in entrepreneurship, mathematics, science, technology, social media, mobile telecommunications, and web development and design, must be prioritised in accordance with 21st century demands. This should require a lot of money, but the long-term benefits to the economy will be immeasurable. Improving education will provide Ghana with capable human resource to enable the country take advantage of existing opportunities, especially in contemporary science and technology, to drive forward the country’s economic growth.
Agriculture: Agriculture is crucial to the Ghanaian economy. Statistics indicate that about 56 per cent of Ghana’s working force is involved in agriculture. It also contributes about 30 per cent to GDP. As a new oil nation, there is the propensity to neglect agriculture, as has been the case in some African oil producing countries such as Nigeria.
According to a 2010 Initiative for public Policy Analysis (IPPA) report on ‘palm Oil’, Nigeria in the years following independence was the leading exporter of major agricultural commodities such as palm kernel and palm oil. It was also the world’s second largest producer of cocoa. But upon discovering oil in 1956, crude oil quickly became the dominant revenue source for the Nigeria government while agriculture plummeted. From over 60 per cent in the late 60s, the contribution of agriculture to Nigeria’s GDP plummeted to 22.2 per cent in the 80s. In Ghana, there is no evidence yet that oil is negatively impacting the country’s attitude to agriculture. Indeed, Ghana this year achieved a one million tonne milestone in the production of cocoa, following adherence to good agronomic practices and payment of remunerative producer price.
However, despite the gains made in the production of cocoa and other cash crops, Ghana has yet to fully exploit the development opportunities agriculture provides. The country is still hugely dependent on food and livestock imports, despite possessing arable land, fine weather, and lots of water for farming irrigation.
According to a Ghanabusinessnews.com report, Ghana spends $450 million on rice imports annually. This, the report says, is “because the country’s self-sufficiency in rice production stands at about 30 per cent, leaving a shortfall of 70 per cent”. This situation applies to other food stuffs. The implication of the foregoing is that billions of dollars in scare foreign exchange, which could help create jobs, reduce poverty and ultimately boost the economy, is spent of importing food, and helping foreign economies expand in the process. Countries such as Malaysia and Indonesia have become far more economically advanced than Ghana partly because they have prioritised agriculture. Both countries are aggressively involved in palm oil production. In 1995, Malaysia was the world’s largest producer, with 51 per cent of world production. Since 2007, Indonesia has emerged as the world’s largest producer of palm oil, producing approximately 50 per cent of world palm oil volume, according to wikipedia.com.
Ghana can follow in the footsteps of these countries by developing a coherent long-term development plan for the agricultural sector, backed by massive financial investment in the sector.Long and medium-term efforts towards building the capacities of local farmers to reduce the country’s shortfall in food production must be initiated.
The Ministry of Food and Agriculture (MOFA) estimates that 90 per cent of farm holding in the Ghana are less than two hectares in size and that the main system of farming is traditional, where hoe and cutlass are the main farming tools. This is largely due to the capital intensive nature of mechanised agriculture. But with oil adding billions of dollars to Ghana’s annual revenue, the government can help improve agriculture by, among other things, providing soft, flexible loans for small-scale farmers to help them venture into mechanised agriculture; providing agricultural materials and equipment - tractors, combine harvesters, pesticides, weedicides, fertilisers- to farmers at subsidised costs; and providing storage and processing facilities across the country to help reduce post-harvest losses of perishable foods and livestock. Most importantly, legislations that will make agriculture more profitable and appealing to ordinary Ghanaians, especially the youth, must be enacted. These interventions will not only lead to creation of tens of thousands of jobs and poverty reduction, but will, alongside the improvement of education, set the tone for Ghana’s economic transformation.
