Ghana’s gold mining sector scored 69 out of 100 points in the 2021 Resource Governance Index (RGI), improving by 13 points since the 2017 RGI. Stronger resource governance was driven by improvements across both the index’s value realization and revenue management components, with notable increases in governance of local impacts and national budgeting. 

Highlights

• Key areas within the licensing and subnational resource revenue sharing subcomponents were still classified as “failing,” reinforcing the need for legislation and further disclosures. • Within value realization, the taxation subcomponent increased by 10 points to score 82 out of 100 points, moving it into the “good” performance band, while local impact improved by 29 points, scoring 100. • Ghana’s national budgeting governance improved due to the adoption of, and adherence to, fiscal rules. • While both law and practice scores improved since the 2017 RGI, the gap between them grew from -8 to -15 points. Enacted laws and rules must be adhered to by relevant state authorities to prevent the implementation gap from growing wider. • Weak adherence to open data standards, as well as the absence of online data portals related to the extractive sector, has held the mining sector back. • Ghana’s oil and gas sector outperformed the older gold mining sector owing to enhanced transparency and accountability in the oil and gas sector legislative framework.

Ghana’s oil and gas sector scored 78 out of 100 points in the 2021 Resource Governance Index (RGI), improving by 11 points since the 2017 RGI. Strengthened resource governance is underpinned by improvements across both the index’s value realization and revenue management components. 

Highlights

• Ghana’s oil and gas sector’s move into the “good” performance band in the 2021 RGI is driven by improvements in the governance of licensing and national budgeting along with continued improvements of the state-owned Ghana National Petroleum Company (GNPC) and the Ghana Stabilization Fund, the country’s sovereign wealth fund.

• Adoption of new laws regarding licensing and national budgeting strengthened Ghana’s extractives legal framework and helped drive the 2021 RGI score increase. 

• Both law and practice scores increased, but the difference between them widens from -7 to -22, signaling a worrying “implementation gap.”

• GNPC improved its performance through commodity sales disclosures, but areas for future improvement include the timeliness of disclosures and aspects of corporate governance.

• The Ghana Stabilization Fund scored a full 100 points on governance, owing to new disclosures of assets and asset classes. 

• Ghana’s oil and gas sector outperformed the older gold mining sector owing to enhanced transparency and accountability in the oil and gas sector legislative framework.

 

Zaratu Yussif

The Natural Resource Governance Institute (NRGI) has urged the sector Ministries, Department And Agencies (MDAs) in collaboration with the Registrar-General’s department to act on the 2019 Companies Act and ensure enforcement of the relevant disclosures by all entities in the petroleum and mining sectors. 

 

The Institute notes that, although the oil and gas sector improved by 11 points in the 2021 Resource Governance Index, disclosures around licensing, beneficial ownership of companies, environmental and social impact assessments, as well as asset declaration by public officials remain inadequate.

 

The Resource Governance Index (RGI), which was virtually launched last week, serves as key point indicators in the extractive sector governance in resource producing countries around the world. It also serves as a global benchmark, country and sector diagnostic tool, and a roadmap for policy and practice reform. The 2021 RGI assesses how 18 resource-rich countries are managing their oil, gas and mineral wealth. 

“The Ministry of Energy and the Petroleum Commission in collaboration with the Registrar-General’s department must act on the 2019 Companies Act and ensure enforcement of the relevant disclosures by all entities under the Petroleum Commission’s regulatory ambit,” said Nafi Chinery, NRGI’s Anglophone West Africa regional manager. “Both institutions must also ensure that industry players adhere to established laws by improving monitoring and compliance.”

 

However, while the overall governance of Ghana’s mining sector remains “satisfactory,” NRGI has classified the country’s ability to realize value from its minerals as a level higher, with a “good” score, due to improved governance of taxation and local impacts. 

The Researchers suggested that, the Ministry of Lands and Natural Resources and the Mineral Commission should accelerate and leverage the ongoing review of the Minerals and Mining Act 2006 to strengthen the legal framework governing the mining sector.

 

“The government should improve legislation in the mining sector to enhance disclosures in licensing and beneficial ownership information as well as asset declaration by public officials,” Chinery said. “The lack of a centralized online data portal with key information on gold reserves, production statistics and annual exports prevents citizens from holding the government fully accountable on its management of gold mining.”

 

NRGI also recommended that relevant government agencies and ministries should adhere to open data principles in line with commitments made through Ghana’s Open Government Partnership National Action Plan to continue improving the governance of Ghana’s extractive sector.

 

Highlights of 2021 RGI report points out that, governance of Ghana’s oil and gas sector has been classified as “good” in a new assessment as it rates oil and gas as better governed than the mining sector, which it classifies as “satisfactory.” 

The RGI team of Researchers scored both sectors higher than in the last edition of the index in 2017.  

 

Also, NRGI experts found that, for the second time, governance of Ghana’s mining sector, with an overall score of 69 points out of a possible 100, lags behind the country’s oil and gas sector, with a score of 78 points.

 

The difference in scores is due in part to the more robust legal framework of Ghana’s oil and gas sector, especially in terms of licensing, where mandatory contract disclosures are required by law. Oil and gas taxation governance also surpasses that of mining. Researchers cited the Petroleum Revenue Management Act, which requires the full public disclosure on all payments and receipts from oil and gas producers to the government. Such good governance stipulations are missing from mining sector legislation.

 

They again found evidence of significant differences between the management of state-owned companies. NRGI found that GNPC, the country’s national oil company, is better governed than state-owned mining enterprise Prestea Sankofa Gold Limited. Researchers noted that GNPC has bolstered its governance both in terms of legal and regulatory frameworks and their implementation. However, GNPC can still make improvements in terms of data disclosure, they said.

 

 The composite index has three components. Two measure essential characteristics of the extractive sector, namely value realization and revenue management, and the third analyses the overall governance framework. These three overall dimensions of governance comprise 14 subcomponents with 51 indicators, which are calculated using 136 questions.

Adnan Adams Mohammed

The 2021 Resource Governance Index rates oil and gas as better governed than the mining sector, which it classifies as “satisfactory.”

The Index, which assesses how 18 resource-rich countries govern their oil, gas, and mineral wealth,  scored both sectors higher than in the last edition of the index in 2017.

The Natural Resource Governance Institute (NRGI) research found that, for the second time, governance of Ghana’s mining sector, with an overall score of 69 points out of a possible 100, lags the country’s oil and gas sector, with a score of 78 points.

"The difference in scores is due in part to the more robust legal framework of Ghana’s oil and gas sector, especially in terms of licensing, where mandatory contract disclosures are required by law", the reputable natural resources policy think-tank emphasized in it's maiden report during a virtual launch event. "Oil and gas taxation governance also surpasses that of mining."

Consequently, the Researchers cited the Petroleum Revenue Management Act, which requires the full public disclosure on all payments and receipts from oil and gas producers to the government. Such good governance stipulations are missing from mining sector legislation. Experts found evidence of significant differences between the management of state-owned companies.

The NRGI resources governance research found that GNPC, the country’s national oil company, is better governed than state-owned mining enterprise Prestea Sankofa Gold Limited. Noting that, GNPC has bolstered its governance both in terms of legal and regulatory frameworks and their implementation.

The NRGI and energy sector analysts at the launch of the report believed that, GNPC can still make improvements in terms of data disclosure, they said. Although the oil and gas sector improved by 11 points in the 2021 RGI, disclosures around licensing, beneficial ownership of companies, environmental and social impact assessments, as well as asset declaration by public officials remain inadequate.

“The Ministry of Energy and the Petroleum Commission in collaboration with the Registrar General’s department must act on the 2019 Companies Act and ensure enforcement of the relevant disclosures by all entities under the Petroleum Commission’s regulatory ambit,” said Nafi Chinery, NRGI’s Anglophone West Africa regional manager. “Both institutions must also ensure that industry players adhere to established laws by improving monitoring and compliance.”

While the overall governance of Ghana’s mining sector remains “satisfactory,” NRGI has classified the country’s ability to realize value from its minerals as a level higher, with a “good” score, due to improved governance of taxation and local impacts.

Researchers suggested that the Ministry of Lands and Natural Resources and the Mineral Commission should accelerate and leverage the ongoing review of the Minerals and Mining Act 2006 to strengthen the legal framework governing the mining sector. “The government should improve legislation in the mining sector to enhance disclosures in licensing and beneficial ownership information as well as asset declaration by public officials,” Chinery said.

“The lack of a centralized online data portal with key information on gold reserves, production statistics and annual exports prevents citizens from holding the government fully accountable on its management of gold mining.”

NRGI also recommended that relevant government agencies and ministries should adhere to open data principles in line with commitments made through Ghana’s Open Government Partnership National Action Plan to continue improving the governance of Ghana’s extractive sector.

 

 

 

Adnan Adams Mohammed

Inspite of devastating impact of COVID-19 on majority of world economies, Ghana's economy recorded strong recovery during the second quarter of this year said Fitch Solutions.

The international rating agency expects the rebound to continue for the remaining two quarters of the year, despite the third wave of COVID-19 in the country.

According to Fitch Solutions, the research arm of rating agency Fitch, its data suggest that the economy was on a strong rebound, consistent with the Bank of Ghana’s Composite Index of Economic Activity as well as Business and Consumer Confidence Survey.

“High-frequency data suggests strong recoveries in Kenya, Uganda and Ghana, while weak Q12021 Gross Domestic Product readings for South Africa and Mozambique point to a muted outlook for Southern Africa,” Fitch Solutions research indicated. Adding that, “although Ghanaian GDP data have not yet been published at the time of writing, PMI readings and the Central Bank’s composite indicator of economic activity both indicate robust growth in economic activity in the first months of 2021.”

However, Fitch Solutions expects the Policy Rate-the rate at which Bank of Ghana lends to commercial banks to remain the same at 13.5 per cent for the rest of the year to support economic recovery.

The economy expanded by 3.1 per cent in the first quarter of this year, aided by Construction, Manufacturing as well as Information and Communication sub-sectors.

But it was lower than what was realised in the same period in 2019.

Senior Risk Analyst in charge of sub-Saharan Africa at Fitch Solutions, William Attwell said the policy rate would be kept at its current level to stimulate economic recovery.

“Our view now is that we expect the Central Bank to hold the benchmark interest rate at its current level -13.5 per cent until the end of the year. This is to enable the economic recovery to gain momentum in the coming months”.

He added: “We expect Ghana’s economy to be among the strongest economies in sub-Sahara Africa this year, growing around 4.5 per cent. We think vaccines rollout in the coming months will help check covid-19 infections.”

The Ghanaian economy expanded by 3.1 per cent in the first quarter of this year, the lowest since the same period in 2019.

However, in the same period of 2020, the GDP growth rate was 7.0 per cent.

According to figures from the Ghana Statistical Services, Construction (14.2 per cent)), Manufacturing (6.1 per cent) as well as Information and Communication (22.1 per cent) sub-sectors were the main drivers of growth for the first three months.

The Agriculture sector recorded the highest growth of 4.3 per cent and was followed by the Services sector with a growth of 4.0 per cent.

 

 

 

Adnan Adams Mohammed

Ghana’s public debt is projected to end the year at a debt to Gross Domestic Product (GDP) ratio of 83.5 percent making the country join the list of debt-distressed countries.

The International Monetary Fund (IMF) data published after its directors concluded the Article IV Consultation with government show the country’s gross public debt hit 78.9 percent of GDP in 2020, contrary to 76.1 percent reported by the Summary of Economic and Financial data.

This technically means, for every GH¢1 worth of economic activity produced in the country in 2020, 78.9 pesewas were classified as debt. So, for the economy to plunge into the list of debt-distressed countries, should the IMF forecast come true, means the difficulty currently facing government as it tries to revive and recover various pandemic-hit sectors will be further compounded.

“Fiscal consolidation is needed to address debt sustainability and rollover risks, as Ghana continues to be classified as at high risk of debt-distress”, the IMF urged and further advised government to put in place robust macroeconomic structures which will ensure fiscal consolidation to avert that fate. 

“To protect the most vulnerable, consideration could be given to more progressive revenue measures and a faster return to the pre-pandemic level of spending, with a shift toward social, health and development spending. Directors also encouraged a timely completion of the planned audit of COVID-19 emergency spending and new expenditure arrears.

“While there are encouraging signs of an economic recovery, they noted that it remains uneven across sectors. In this context, directors stressed the importance of entrenching prudent macroeconomic policies, ensuring debt sustainability, and pressing ahead with structural reforms to deliver a sustainable, inclusive, and green economic recovery,” the statement said.

Besides the high public debt, the fiscal deficit including energy and financial sector costs worsened to 15.2 percent of GDP, with a further 2.1 percent of GDP in additional spending financed through the accumulation of domestic arrears, the report stated.

The IMF however projects the economy to rebound strongly to 4.7 percent in 2021, compared to the 0.4 percent recorded in the first year of the pandemic (2020). This growth, the Fund says, is supported by a strong cocoa season, mining and services activity.

Also, the current account deficit is projected to improve to 2.2 percent of GDP from the 3.1 percent recorded in 2020, supported by a pickup in oil prices, and gross international reserves are expected to remain stable.

However, the IMF cautioned that this and other projections in the budget – such as the fiscal deficit of 13.9 percent of GDP – are uncertain, given new waves of the pandemic.

The IMF further emphasized that government’s digitisation drive and structural transformation are key to recovering the economy. “Structural transformation and digitalisation agenda are critical to support the recovery. The structural transformation can be complemented by the ongoing energy sector review, diversification in tourism, and the digital transition which has the potential to reduce corruption, boost tax revenues, and improve service delivery,” the statement said.

 

 

Tullow Oil plc, an independent oil and gas, exploration and production group, which is quoted on the London, Irish and Ghanaian stock exchanges (TLW) and is a constituent of the FTSE250 index, has said it bagged some $700 million for the first half of the year 2021.

The Group, which has interests in over 50 exploration and production licences across 11 countries including Ghana where it operates the Jubilee and TEN fields, made the revelation in its update and guidance in advance of its 2021 Half Year Results, which are scheduled for release on 15 September 2021.

Mr Rahul Dhir, Chief Executive Officer, Tullow Oil plc, commented today that: “I am pleased to report that Tullow has made excellent operational and financial progress in the first half of 2021. Our producing fields in West Africa are performing well and we have successfully started our drilling programme in Ghana. This strong operational performance, combined with continued capital discipline, improved market conditions and asset sales in Gabon and Equatorial Guinea, supported our transformational debt refinancing. Tullow now has a strong financial footing and we are making very good progress in delivering on our highly cash generative business plan and continuing to reduce our debt.”

Production

Group working interest production in the first half of 2021 averaged 61,200 bopd, in line with expectations. Full year 2021 guidance has been revised to 55,000 - 61,000 bopd (from 60,000 to 66,000 bopd). The guidance reflects the sales of the Equatorial Guinea assets and the Dussafu Marin permit and first half delivery.

Ghana

In the first half of 2021, Jubilee gross production was slightly ahead of expectations, averaging 70,600 bopd (net 25,100 bopd). TEN gross production averaged 37,000 bopd (net 17,400 bopd). Combined FPSO uptime was in excess of 98%. Improved gas offtake and increased water injection rates in Jubilee have been sustained, averaging between 110-130 mmscf/d and over 200 kbw/d, respectively. The 2021 drilling campaign is progressing well. The first Jubilee producer (J-56) is now onstream with encouraging initial flow rates. The well is adding c.10kbopd to the Jubilee field rate, slightly ahead of pre-drill expectations. The rig is now completing a Jubilee water injector (J-55 WI) with tie-in expected in the third quarter of the year. The rig will then move on to drill a TEN gas injector and a second Jubilee producer, with tie-in expected in late 2021 and early 2022, respectively. As a result of the new wells, average production from Jubilee is expected to increase in the second half of the year before growing further in 2022 as the drilling campaign continues.

Non-operated

In the first half of 2021, net production from the non-operated portfolio was 18,800 bopd, in line with expectations. Following the sale of assets in Equatorial Guinea and the Dussafu Marin permit in Gabon, some capital expenditure has been re-allocated to accelerate the Simba expansion development in Gabon. Development of this low-risk, high-return project is expected to commence in the third quarter of 2021 with a positive impact on 2021/2022 production.

Kenya

The Kenya project has been through a full redesign using data from the 2018 -2020 Early Oil Pilot Scheme (EOPS) being fed into the model which is providing better understanding of both the resource and the optimum development plan. The technical work is complete, and the resource volumes are being audited by Gaffney Cline Associates (GCA) ahead of detailed project plan discussions with the Government of Kenya over the coming months. Tullow and its JV Partners expect to provide a project update to the market in the second half of 2021.

Exploration

In the emerging and maturing basins of Guyana, Suriname, Argentina and Côte d’Ivoire, prospect maturation continues across the exploration portfolio to unlock value from the substantial prospective resources identified. Around the Group’s producing assets in Ghana, Côte d’Ivoire and Gabon, the exploration team are maturing several near field and infrastructure-led opportunities as potential future drilling candidates. Separately, Tullow has exited Blocks Z38 and Z64 in Peru and PEL 0037 in Namibia.

Financial Update

First half of 2021

On 17 May 2021, Tullow completed a comprehensive refinancing of its debt, successfully issuing $1.8 billion of Senior Secured Notes with five-year maturity. The Group also entered into a new $500 million Super Senior Revolving Credit Facility, which will primarily be used for working capital purposes. Tullow completed the sales of its Equatorial Guinea assets and the Dussafu Marin permit in Gabon to Panoro in March and June respectively, receiving c.$133 million. These transactions also include further contingent cash payments of up to $40 million linked to asset performance and oil price. Following the completion of Tullow’s comprehensive refinancing and as part of the preparation of statutory accounts, the Group has completed a reassessment of its going concern status. As a result, Tullow expects to prepare its financial statements for the six months ending 30 June 2021 on a going concern basis with no material uncertainty. Revenue for the first half of 2021 is expected to be c.$0.7 billion with a realised oil price of $58/bbl, including hedge costs of c.$50 million. First half underlying operating cashflow1 is expected to be c.$0.2 billion, and pre-financing cash flow for the same period is expected to be c.$0.2 billion. At 30 June 2021, net debt is expected to be c.$2.3 billion and liquidity headroom and free cash are expected to be c.$0.7 billion. Capital expenditure for the first six months of the year was c.$100 million. As of 30 June 2021, Tullow’s hedge portfolio provides downside protection for 51% of forecast production entitlements through to May 2023 and 29% for a further 12 months to May 2024. Since completion of the comprehensive debt refinancing in May, new hedges have been placed with $55/bbl floors and weighted average sold calls of c.$70/bbl.

Full year guidance

Full year Group capital expenditure is expected to be c.$250 million (previously $265 million), reflecting the reduction in capex following the sales of the Equatorial Guinea assets and the Dussafu Marin permit in Gabon, offset in part by the acceleration of the Simba expansion development in Gabon. Assuming $60/bbl for the remainder of the year, full year underlying operating cashflow1 is expected to be c.$0.6 billion and pre-financing cash flow is expected to be c.$0.4 billion2. If oil price averages $70/bbl for the remainder of the year, these figures would increase by c.$50 million. Cash financing costs for 2021 are expected to be c.$290 million, including c.$60 million of fees associated with refinancing activities. A final Investment Decision for the Lake Albert Development in Uganda is expected to be taken this year and would trigger a $75 million payment to Tullow from Total.

 

The Registrar-General’s Department (RGD), has commenced the validation of companies in line with the directive for dormant companies to file their returns.

Companies that fail to file returns face being delisted from the Companies Register.

The three-month-long review began on July 1, 2021, and will end on September 30, 2021.

“The review has become necessary after the Final Notice was issued on 18/03/2021 to officials of dormant Companies to file their Annual Returns to be in good standing with the Department,” it noted in a statement.

The strike-off exercise became necessary as a result of the Department’s Company database being bloated with names of dormant companies entered onto the Companies Register.

“In summary, 257,241 Companies existing in the new database had not filed their Returns or Amendments with the Department, and 670,282 Companies in the Legacy system had not carried out their re-registration as at the release of the first Notice in March 2020,” the statement outlined.

“Companies due for strike off still in default after this three-month review would be published in the National Dailies and the Department’s website. A Company’s status at this period would be classified as being inactive and would not be able to be accessed for any business transaction for the next 12 years except by a Court Order to the Registrar to restore it to a status of good standing in the Companies Register,” the statement added.

The department thus advised such companies  “to use this three-month review to undertake all the necessary measures to be in good standing with the Department if they were not able to do so all this time and are still interested in carrying on business with that name.”

It reminded companies that the penalty for late filing remains GH¢450.00 and GH¢50.00 for filing of Annual Returns for each year.

  

Adnan Adams Mohammed

The Bank of Ghana has assured commercial banks account holders whose dormant accounts will be transferred to the central bank that they will not lose their funds. 

Following directives from the Central Bank, all commercial banks and specialised deposit-taking institutions (SDIs) are to transfer all funds in dormant accounts to the Bank of Ghana. 

Many Ghanaians  have  raised  concerns after the directive was announced. Many fear that, funds transferred to the Central Bank will be almost impossible to retrieve the funds due to the cumbersome bureaucracies in the public service. But, the BoG has dismissed such fears.

“Customers whose dormant accounts are transferred to the Bank of Ghana do not lose such funds”, the central bank said in a statement.  

“They or their legal representatives can make claims for the funds by presenting all relevant documentation”, the statement said, adding: “Identification and claiming of funds at the Bank of Ghana is not a tedious process”.  

Read the BoG’s full statement below: 

PRESS RELEASEADDRESSING MISCONCEPTIONS ABOUT THE BANK OF GHANA’S DIRECTIVE ON DORMANT ACCOUNTS 

The attention of the Bank of Ghana has been drawn to information circulating on social media to the effect that customers whose accounts are dormant should hurriedly reactivate their accounts or risk losing their funds to the Bank of Ghana.  

The Bank of Ghana wishes to inform the general public that the recently published directive on dormant accounts seeks to provide directions to banks and Specialised Deposit-Taking Institutions (SDIs) on how to protect accounts of customers which have remained inactive (no deposits or withdrawal) for a period of two years. 

Such accounts are placed in dormant accounts registers and after further three years of no reactivation, the funds are transferred to the Bank of Ghana.  

The key ingredient in the reactivation process is the identification of the customer. 

Customers whose accounts fall in this category are encouraged to contact their bankers to reactivate the accounts.  

As a proactive measure, the Bank of Ghana’s directive urges banks and SDIs to contact customers whose accounts are dormant to reactivate such accounts.  

Please note that as part of the directive, banks and SDIs will publish accounts that remain dormant for a period of five years on their websites and in two daily newspapers, as a means of notifying account holders who may not have reactivated their accounts. 

For additional protection of accounts that have remained dormant for a minimum of five years, funds in such accounts will be transferred to the Bank of Ghana by banks and SDIs after the newspaper publication.  

Customers whose dormant accounts are transferred to the Bank of Ghana do not lose such funds.  

They or their legal representatives can make claims for the funds by presenting all relevant documentation.  

Identification and claiming of funds at the Bank of Ghana is not a tedious process.

 

Adnan Adams Mohammed

Key stakeholders in Ghana’s energy industry are calling on the government to as a matter of urgency to privatise the Tema Oil Refinery (TOR) and bring in an enterprising leadership.

According to the industry player, it is time to allow Private Sector Participation as successive governments have failed to retool and operationalize the country’s once viable asset. This, they believe can yield the needed results the country is yearning to derive from the deteriorating state asset as it is currently engulfed with ballooning debt and operational inefficiencies. 

Fortnight ago, the President sacked both the managing director and deputy of the Refinery in the wake of recent impasses at the refinery between top management and junior staffs and workers. The Energy Minister has thereby inaugurated an Interim Management Committee to take up management and control of the facility until a substantive Board and Management team are appointed. 

But, the Chairman of the Association of Oil Marketing Companies wants government to quickly privatise the Refinery before investors lose interest as he believes that, should government privatise TOR, the job opportunities will be enormous.

“In any case if we have private participation in there, it doesn't mean loss of jobs or anything. If you're building the capacity you're creating more jobs. A 300,000-barrel capacity refinery is going to create so many jobs for everyone,” the AOMC and the outgoing Managing Director of Engen, Henry Akwaboah emphasized. 

However, an energy Strategist and Lead Technical Consultant to COPEC in suggesting some alternative solutions to end the over decade long under-performing of the nation’s only refinery urged government to appoint a visionary and enterprising leader to manage the Tema Oil Refinery (TOR).

“TOR currently needs an enterprising leader to turn the fortunes of the Refinery around”, Dr. Yusif Sulemana posited when he reacted to the sacking of the TOR MD and his deputy. “The refinery has been idle and part of this is because of these issues. They do not have stable leadership. So going forward, the MD is fired. We need to get a stable leadership. We need to get a leader who is business minded and I can tell you government needs to get an enterprising, energetic, selfless person to take charge of the refinery with a business focus.”

He further noted that the next Managing Director must be committed to work to improve the operations at the refinery “like a business” within a given time frame, with the requisite resources provided.

Meanwhile, government has appointed a 3-Member Interim Management Committee to oversee the affairs of the Tema Oil Refinery. 

The chairman of the IMC is Mr Nobert Cormla-Djamposu Anku. The other members are Mr William Ntim Boadu and Mr Okyere Baffuor Sarpong.

The committee has been tasked to, among others, ensure the smooth transition from the outgone directors, to undertake technical and human resource audits, as well as receive and assess viable partnerships for TOR.

Speaking after the swearing-in ceremony at the refinery, the energy minister, Dr Mathew Opoku Prempeh noted that TOR and its crippling debts, infrastructural issues and equipment have been well noted, and that since the 4th Republic, every president has thought about value addition to Ghana’s natural resources.

Dr Prempeh urged the staff of the refinery to put all rancour behind them, cooperate with the IMC and work hard to ensure the success of the refinery.

Consequently, the Executive Secretary of the Chamber of Petroleum Consumers (COPEC), Duncan Amoah has charged the Ministry of Energy to outline Key Performance Indicators for the next Managing Director to be appointed to steer the affairs of the struggling Tema Oil Refinery (TOR).

“Once you start putting the right persons in place, you’ve solved one of the 3 key challenges needed to be dealt with for TOR to be turned around. You need a sound and competent management in place, you also need to detach the overbearing politicking or political interference that happens with the refinery and the third one, get the right investments to upgrade their tools and equipment.”

“We would be hoping that the new managers will be coming in with a certain performance agreement with their appointers knowing strongly what their timelines are in the first 3 months, 6 months, a year etc,” he added.

Also, the Member of Parliament for Dormaa East, Paul Apraku Twum Barimah commended the President, Nana Akufo-Addo and the Minister of Energy, Mathew Opoku Prempeh for taking the initiative and the bold step to revive The Tema Oil Refinery.

Paul Twum Barimah believes that TOR is a strategic facility in the oil sector and therefore reviving it will boost the downstream petroleum sector in Ghana.

According to Mr Twum Barimah, the government has taken the responsibility to pay the legacy debt of TOR and changed the entire management of TOR; a move which saw the MD and his deputy being relieved of their posts.

Speaking in an interview with the Media, he said the move by the president of Ghana and the Minister of Energy will help bring sanity and calm at TOR and lead to the transformation needed to promote efficient production.

 

Ghana’s 2021 budget, titled Economic Revitalization through Completion, Consolidation and Continuity, was widely anticipated. Ghanaians hoped that the budget would include steps to address both the immense challenges brought on by the coronavirus pandemic and low revenues resulting from a downturn in crude oil prices. Revenue shortfall amounted to GH₵13.6 billion while expenditures rose by an estimated GH₵11.7 billion in 2020; this has led to more uncertainty about the future of Ghana’s recovery plans.

In addition, as in many other African economies, debt also threatens the projected economic recovery in Ghana, something the government has acknowledged in the 2021 budget.

Commodities are expected to play an important role in addressing Ghana’s debt challenges. Petroleum exports will likely decline in the medium term , from a peak of 71 million barrels in 2019 to about 59 million barrels in 2024, and so will revenues. Though crude oil prices have recovered from the depths of the second quarter of 2020, there is no guarantee that these will be sustained, thus limiting the role of petroleum revenues in addressing Ghana’s debt burden. Nonetheless, petroleum is still an important source of revenue and a likely part of the solution to Ghana’s public financial challenges.

Unresolved governance issues

Despite the 2021 budget’s attempt to address concerns around petroleum revenue spending in Ghana, it fails to address key governance questions around what will happen to unspent revenue and what constitutes public investment, among other issues.

Allocation for public investment

Public investment is generally understood to be spending on assets or infrastructure with long lifespans. But the lack of a clear explanation of Ghana’s public investment expenditures has over time led to various approaches by the Ministry of Finance on where to allocate the funds, leading to disagreements among different stakeholders. For example, between 2011 and 2016, 70 percent of oil revenue designated for budget support (the Annual Budget Funding Amount, or ABFA) was allocated to capital spending, which includes roads, agriculture, education and health infrastructure, against 30 percent allocated to recurrent expenditure, which typically covers payments for services and supplies. The Petroleum Revenue Management Act (PRMA) Section 21(4) states: "For any financial year, a minimum of seventy percent of the Annual Budget Funding Amount shall be used for public investment expenditures consistent with the long-term national development plan or with subsection (3)."

In 2017, the government prioritized spending of oil revenues on “physical infrastructure and service delivery in education,” in line with the PRMA. Civil society organizations raised concerns about whether this spending was consistent with the Ministry of Finance’s previous interpretation, which had restricted public investment expenditure to capital spending Between 2017 and 2019, recurrent expenditure on the Free Senior High School Program, which included the payment of fees and supplies, represented an average of 52 percent of ABFA. The Public Interest and Accountability Committee (PIAC) called on the government on numerous occasions to adhere to the Ministry of Finance’s previous interpretation of the PRMA but the government argued that investment in education qualifies as public investment expenditure and that is not entirely synonymous with capital expenditure, with an explanation included in the 2021 budget.

This changing interpretation of “public investment expenditure” has led to recurrent expenditures for which volatile petroleum revenues are ill-suited. Previous NRGI research has emphasized the challenges with spending volatile resource revenues on recurrent expenditure. There is broad consensus that public investment in key sectors can enhance growth. Ghana’s government should clarify the definition of public investment expenditure to refer to only non-recurrent expenditure in the PRMA Regulations (L.I. 2381) or in a PRMA amendment.  This would also encourage consistent implementation of the rule by future ministers of finance.

Unspent petroleum revenues at the end of the year

The use of unspent petroleum revenues at the end of the budget year is another unsolved issue. Successive governments have managed unspent ABFA differently since this first came up in 2014. That year a total of USD 222.93 million (GH₵666.06 million) of ABFA was unspent. The amount, according to the Ministry of Finance, was returned to the Bank of Ghana at the end of that year as the bank assessed the government’s financial position. However, in 2015, the Ministry of Finance did not disclose of how it applied a balance of GH₵36.41 million. The following year’s Ministry of Finance reconciliation report made no mention of the unused balance, as it should have. Similarly, the Ministry did not account for the unused balance of GH₵77.73 million at the end of 2016 in its report to the parliament.

In 2020, the Ministry of Finance brought forward and spent unused ABFA from 2017-2019 (amounting to GH₵1.48 billion; see figure above) alongside allocations for 2020. Since 2018, the PIAC and other civil society actors have called upon Ghana’s government to provide details of the unspent revenues; these calls only elicited a public response in the heat of the campaign leading up to the December 2020 elections. According to the ministry, the combined 2017 and 2018 amount of GH₵652.29 million was transferred to the Road Fund while 2019’s GH₵827.60 million was used to meet the 2020 ABFA shortfall due to the pandemic. It is unclear which provisions, if any, in the PRMA support the transfer of unspent ABFA into the Road Fund or to meet ABFA shortfalls in subsequent years. Also unclear is which year’s appropriation (budget)—which provides the legal authorization to spend based on agreed activities—covered the spending of these unused revenues.

Additional challenges to the financial management of Ghana’s public sector include delays in the contracting process for projects, disbursement of funds and contract execution. Issues related to unspent ABFA will continue unless these challenges are resolved. Dialogue and consensus building among stakeholders on how to treat unspent funds in the future would avoid various conflicting interpretations arising between provisions in the Public Financial Management Act and the PRMA.

While the PRMA does not prescribe how unused ABFA at the end of the year should be treated, Section 21(1) provides that it must be part of the national budget and subject to same budgetary processes, bringing the ABFA under the public financial management rules in terms of management and accounting. And Section 26 of the Public Financial Management Act states clearly that such appropriations lapse by the end of the first month of the following year, meaning that the government needs a new appropriation from the parliament to use these funds.

Section 26 of the Public Financial Management Act, 2016

Inability to spend within the appropriation period, for whatever reason, creates public financial management complications in terms of unspent balances, re-budgeting and project execution. With petroleum funds, unspent funds make tracking and accounting for revenues within the framework of the PRMA provisions difficult.

Ghana’s government must urgently tackle the underlying issues of public financial management and delays in projects on which the money is spent. In addition, stakeholders (the Ministry of Finance and ministries that receive ABFA; oversight bodies like PIAC and Ghana EITI; and civil society actors) must engage in order to answer the following questions and possibly factor them into future amendments of the PRMA:

What should happen to unused ABFA and where should these unused funds be saved?

Should new appropriation in accordance with the Public Financial Management Act allow for a change in projects and programs earmarked in a previous appropriation?

Does government ringfence ABFA funds, and if not, should they?

Discretionary capping of the Ghana Stabilization Fund

The Petroleum Revenue Management Regulations (L.I. 2381), passed in 2019, sought to address the situation where the minister of finance sets a discretionary cap on the Ghana Stabilization Fund by defining a formula for setting the cap. Regulation 8(1) states “In pursuance of Section 23 of the Act, the Minister shall, in recommending the maximum amount of accumulated resources in the Ghana Stabilisation Fund, ensure that the amount is not less than the average Annual Budget Funding Amount over a three year period.” While this provides guidance for setting a maximum balance on the fund, no minimum amount is specified; this could leave little money in the fund for its stated purpose of addressing revenue volatilities or debt. Though the 2021 budget did not propose a cap, the implementation of L.I. 2381 will mean that the Ghana Stabilization Fund would likely not grow beyond USD 400 million in the medium term (based on petroleum revenue projections in the 2021 budget). While a lower ceiling on the Ghana Stabilization Fund would make funds available for real-time debt servicing, it reduces the opportunity for government to rely on the fund to address shocks to the economy, fund future budgets and service future debt.

Ways forward

Resource revenues and good public financial management have the potential to help address Ghana’s financing and borrowing needs, and its economic recovery plans. To ensure this potential is realized:

The government should adhere to the generally accepted interpretation of public investment as referring to non-recurrent spending, and clarify this in the Petroleum Revenue Management Regulations (L.I. 2381) to avoid using volatile revenue streams for recurrent expenditures.

The Ministry of Finance should initiate consultations on an amendment of the PRM regulations that would provide clarity on how government should manage unspent revenues.

The government should undertake a review of the capping mechanism of the stabilization fund.

 

Denis Gyeyir is an Accra-based Africa program officer with the Natural Resource Governance Institute (NRGI).

 

Adnan Adams Mohammed

Ghanaians are seriously agitating against the skyrocketing increase in prices of building materials in recent times.

The untold trend have pushed some high profile Ghanaians to add their crying voice as a former Deputy Finance Minister has charged Parliament to look into the reasons behind the leapfrog hikes in the prices of building materials such as sand, stones, cement, iron rods and the likes inspite of the effect of COVID-19 on cost of living.

Some key stakeholders in the building and construction sectors, such as, the Ghana Chamber of Construction Industry have pointed out that, Ghanaians are likely to struggle to rent and acquire houses in the near future, if nothing is done to halt the unusual rise in the price of building materials. 

 

 

"if the situation is not checked, prices of other building-related services will also rise", speaking on the floor of Parliament on, last week,  Kwaku Kwarteng, a member of parliament for Obuasi alarmed.

“These price developments have triggered further hikes in building-related services, such as excavations, drilling, tiling etc. Indeed, I have heard complaints that even water supply to construction sites and construction labour have all become unusually more expensive. It is hard to figure out the source of these unusual price increases. We know that Parliament has not passed any law that could have added any tax or levy to the prices of these items.”

“Mr. Speaker, it is a strange development that must be frontally addressed. We need to check this for the sake of the construction industry, and more importantly, we need to get to the bottom of this disturbing development to ensure that it does not spread to other commodities and other industries on the market. It is, therefore, my respective view that Parliament needs to take steps, under our standing orders and the law, to assist the country deal with this matter,” he added.

 

The CEO of the Chamber of Construction Industry, Emmanuel Cherry, speaking against the development said, that is what they have been calling on government to take a keen interest in the issue as it will eventually impact its budget.

 

“Honestly speaking we have taken a key interest in the issue, that’s the reason we took the pains to petition parliament. So we welcome the call by the former Deputy Minister of Finance. The time to correct the development is now. There is no better time than now to take steps to save this country. Because a time is coming if we are not careful you cannot rent or buy a house because of this challenge.”

 

“A time is coming, if government is not careful, building cost is going to be so alarming that a kilometre of road is going to be expensive. Even as we speak, automatically, all contractors who have abandoned site if they are moving back, their contracts might have to be reviewed upwards, which will impact government’s budget. So let’s all come together to resolve the problem before it gets out of hand,” he added.

As the demand for houses increases, the COVID-19 induced restrictions have had a negative toll on the construction industry.

This has been widely attributed to the exponential increase in construction materials, which are mostly imported.

Some of the major construction items which prices have been affected include iron rods and cement.

It is worthy to note that a ton of iron rods which used to cost GHS4,000 only a few months ago has shot up to a little over GHS5,000.

Checks have revealed that, a bag of cement has increased by GHS3 from GHS38 and now selling at GHS41.

Samuel Amegayibor, Executive Secretary of Ghana Real Estate Developers Association (GREDA) believes these price hikes have contributed to the dip their businesses are currently facing.

“I called the cement manufacturers, and they admitted that there has been a price hike, and it’s because of certain challenges they are facing in importing the major material which is called clinker. They are telling us that some of the sources of the clinker have either closed down, and generally, the international market price has gone up and also the cost of freight has also gone, and shipping lines have attributed it to the cost of crude oil, which has also spiked.”

 

 

Adnan Adams Mohammed

Industry players, including investment bankers and business leaders, have lauded the establishment of a Development Bank. 

 

They believe it will serve as a panacea for addressing long term financing challenges experienced by local industries.

The Government of Ghana in partnership with the European Investment Bank, and other international development institutions have committed to the establishment of a new development finance institution in Ghana to provide patient capital for Ghana’s industrialisation agenda. A leading investment banker has endorsed the approach being used for the establishment of the Development Bank Ghana.

"The Development Bank Ghana is set up to attract very cheap capital which should boost Ghana’s economic growth through agriculture and manufacturing", the Deputy Managing Director of the Ghana Stock Exchange, Abena Amoah speaking at a development finance series organised by Citi TV and Citi FM in collaboration with the research and consultancy centre of the University of Professional Studies in Accra, last week, noted.

Also, the President of Association of Ghana Industries (AGI), Dr Yaw Adu Gyamfi has expressed confidence in the sustainability of Ghana’s development bank.

According to him, the development bank will serve as a panacea for addressing long term financing challenges experienced by local industries.

Speaking at a corporate dinner series for CEOs of Large Corporates organised by the Association of Ghana Industries in Accra, last week, Dr. Adu Gyamfi noted that governance structures being put together for the Development bank inspires hope.

“This is an investment bank and not a depository bank. No one has asked anyone to go and put money there…In terms of the policies and the laws that have been passed, this bank should not be like NIB or ADB, and we are hoping for the best,” Dr. Adu Gyamfi said.

He added that the business community has its “eyes open to ensure that the bank survives” because its survival will mean a lot to the nation’s industrial development and also curb the growing number of unemployment.

The Development Bank Ghana, when fully operationalised, will serve as a wholesale bank, attracting cheap capital and lending to special sectors of the economy through commercial banks.

Despite being described as the bedrock of Ghana’s economic development, the agriculture and manufacturing sectors receive just 4 and 8 percent respectively of investment.

The situation results from the lack of capital due to the short term nature of investment funding available and this propelled the establishment of a new development bank.

This, however, will not be the first time government is establishing a development bank.

According to Dr Emmanuel Debrah, a finance Lecturer at UPSA, all development banks have collapsed due to poor corporate governance.

“When I heard of the Development Bank, what came to mind was all the development banks Nkrumah built. All of them are no more. The question is what have we learnt from there to guide the sustainability of the yet to be operational Development Bank, Ghana… Research has shown that all development banks in the past collapsed due to poor corporate governance,” Dr. Debrah noted.

Subsequently, Director of the Financial Sector Division of the Ministry of Finance, Sampson Akligo, speaking on the same platform, gave the assurance that the Government is plugging all loopholes to ensure the Development Bank Ghana stands the test of time.

“Typically, the way the bank was set up under the Companies Act gives us some level of immunity so in that case, we don’t have direct political involvement. Secondly, we have done all that we can to make sure that recruitment is done through an independent process,” Mr Aklogo said, adding that the diversity of the partners working with the government to establish the bank is a testament to its sustainability.

Addiyionally, Madam Abena Amoah who was on the same panel endorsed the government’s approach noting that “Development bank is structured to raise very cheap funds” which should “allow businesses to borrow into the target sectors”, i.e. manufacturing, housing, agriculture etc.

Speaking on why Ghanaian businesses prefer debts to equity in their quest for funding, Awura Abena Agyeman, CEO of wear Ghana noted that young businesses are not just interested in money but also in what she calls smart Capital.