News / Africa

    Newly Oil-Rich Ghana Struggles to Please

    Reuters
    When Ghana struck oil in 2007, citizens expected the industry would bring them better lives and investors anticipated hefty profits from a rising African economic star.

    Six years later, all of them are complaining.
           
    Lower-than-expected production from the offshore Jubilee field and funding a costly presidential election process in 2012 have left the West African nation struggling to deliver promised development projects while keeping its finances in order.
           
    The situation underscores the complex reality of translating raw materials into prosperity on a continent notorious for the 'resource curse'' of graft, strife and mismanagement that has hit oil-rich countries like Nigeria, Angola and Equatorial Guinea.
           
    Ghanaian president John Dramani Mahama gives a speech in Accra, Dec. 10, 2012.Ghanaian president John Dramani Mahama gives a speech in Accra, Dec. 10, 2012.
    x
    Ghanaian president John Dramani Mahama gives a speech in Accra, Dec. 10, 2012.
    Ghanaian president John Dramani Mahama gives a speech in Accra, Dec. 10, 2012.
    Newly-elected President John Dramani Mahama is walking a fiscal tightrope between ordinary Ghanaians demanding swift change and investors alarmed by the country's ballooning debt.
           
    A stumble could prove politically costly for Mahama and
    financially disastrous for Ghana as it seeks to retain its access to credit to fund rapid growth.

    "Because of oil production, rising expectations in Ghana
    will have to be met. But at the same time, past policy choices constrain the room for maneuver and Ghana is toeing a very delicate line,'' said Razia Khan, Africa analyst at Standard Chartered Bank in London.
           
    Eschewing the deepest of cuts, Ghana's 2013 budget plotted a middle-of-the road route intended to trim the deficit while using increased revenues to fund a jump in public spending.
           
    Last month, Finance Minister Seth Terkper unveiled plans to pare the government's deficit to 9 percent of gross domestic product (GDP) this year from 12.1 percent in 2012, while cranking up expenditures by 20 percent.
           
    That disappointed economists who were expecting Ghana to reaffirm its commitment to a deficit of 6 percent of GDP - the target it set and then widely missed in 2012.
           
    Rating agency Fitch had already downgraded the outlook for Ghana's credit rating to negative from stable in February after details emerged of deteriorating public finances, a blow to its reputation as a model of African potential.
           
    Total public debt rose by more than a fifth last year to
    $18.8 billion, versus $15.3 billion in 2011.

    Studying under trees

    Rare in a region where coups, civil wars, disputed elections and strong-arm rulers are the norm, Ghana has distinguished itself with six peaceful transfers of power via the ballot box.
           
    That reputation allowed it to launch a $750-million eurobond in 2007 and helped it secure the accolade of hosting Barack Obama for his first African trip as U.S. president in 2009.
           
    Across the capital Accra, evidence of new resource wealth abounds: brightly-lit multi-storey buildings, cranes looming over construction sites, well-paved roads and billboards advertising banks, cars and mobile phones.
           
    But many Ghanaians remain excluded. An influx of rural
    workers hoping for jobs in Accra, has spawned a sprawl of outlying shanty towns and spilled vendors across the streets.

    Standing in a trash-strewn courtyard, 49-year-old school teacher Monica Quansah wonders where the oil money is going.
           
    "Our children are still attending school under trees,'' she said. "Those of us in the city don't have reliable power and water, let alone those in the regions.''
           
    Grace Asantewaa, who voiced hope three years ago that oil would improve people's lives, said she had yet to see any benefit.

    "Nothing has changed. We are even worse off than before because prices have shot up significantly,'' she said behind her stall of tomatoes and chilli peppers at the teeming Agbogbloshie market along a potholed road in the seaside capital.
           
    Mahama won the presidency in December by tapping into public frustration at the slow pace of change for ordinary Ghanaians.
           
    Among other things, he promised to build 200 new school blocks within his first four years, bolster crumbling water and power infrastructure, pave roads outside Accra and sustain economic growth at 8 percent or more.
           
    But he was dealt a tough hand.

    Technical hitches meant Tullow Oil's Jubilee field, 80 km (50 miles) offshore and the prime engine for revenue growth, produced 72,000 barrels per day in 2012, well shy of a 90,000 bpd target.
           
    A report last month showed Ghana received $540 million from the oil industry last year, far short of a projected $774 million. About $32 million of that was saved in Ghana's two-year-old sovereign wealth fund, which was valued at about $72 million at the end of 2012.

    Nigeria's oil-fed sovereign wealth fund, by comparison, is worth about $1 billion.
      
    A public pay hike and election spending after the sudden death of President John Atta Mills in July further squeezed finances. Simply organizing the voting last year cost $125 million - over one percent of planned annual public spending.
           
    Ghana has missed its budget deficit target in every election year since constitutional rule was restored in 1992. Vice President Kwesi Amissah-Arthur said the government chose slow fiscal consolidation to balance growth and stability.
           
    "An attempt to correct the fiscal imbalance in one year
    would be extreme,'' he said. "We'd be putting the brakes on at a time when we also have the responsibility to ensure economic growth to create employment opportunities for our people.''

    The West African country ranked among Africa's fastest growing economies in 2011 and attained a lower middle-income status, propelled by the 2010 start up of oil production.
           
    With reserves of 800 million barrels of high-quality oil and potential for at least one billion more, the field makes Ghana one of sub-Saharan Africa's top 10 oil producers. Tullow hopes to produce 120,000 bpd this year and 200,000 bpd by 2015.
          
    Tough decisions

    Despite the budgeted spending jump, Ghana will struggle to fulfil the social projects planned this year, said Amissah-Arthur, who also chairs Ghana's economic management committee.
          
    "It means we could only be providing one or two of those school blocks this year and that's not good enough,'' he said, adding the government was seeking private sector investment.
           
    Ghana is also grappling with power and water infrastructure problems that authorities say will require hundreds of millions of dollars to fix. Payments to private-sector healthcare providers and some public-sector workers are also in arrears.
           
    Joe Abbey, economist at the Accra-based Center for Policy Analysis, said the government must prioritize.
           
    "There are verifiable deficiencies in our infrastructure.
    The most critical one is energy,'' he said. "It's a huge problem because every economic activity depends on reliable energy.''
           
    In an ironic twist to the nation's status as an oil
    producer, Ghanaian power utility, Volta River Authority, has been rationing power since September because it lacks the money to buy light crude after a subsea pipeline was damaged.

    Ghana is hoping to start producing its own natural gas to generate power by year-end, but until then residents will have to bear power cuts lasting 12 hours every other day.
       
    In a sign the government is feeling the financial pressure, Mahama's administration slashed fuel subsidies in February, resulting in a 20-percent rise in prices at the pump.
           
    "We must learn to cut our coat to fit out cloth,'' said Bruce Ayiku, a 53 year-old physician. "There's too much extravagance around government machinery of late.''

    You May Like

    Republicans Struggle With Reality of Trump Nomination

    Despite calls for unity by presumptive presidential nominee, analysts see inevitable fragmentation of party ahead of November election and beyond

    Despite Cease-fire, Myanmar Landmine Scourge Goes Unaddressed

    Myanmar has third-highest mine casualty rate in the world, according to Landmine and Cluster Munition Monitor, which says between 1999 to 2014 it recorded 3,745 casualties, 396 of whom died

    Video Energy Lacking at Annual Offshore Oil Conference

    The slump in oil prices that began in 2014 has taken a toll on the industry but all express confidence it will end eventually

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Press Freedom in Myanmar Fragile, Limitedi
    X
    Katie Arnold
    May 04, 2016 12:31 PM
    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Press Freedom in Myanmar Fragile, Limited

    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Taliban Threats Force Messi Fan to Leave Afghanistan

    A young Afghan boy, who recently received autographed shirts and a football from his soccer hero Lionel Messi, has fled his country due to safety concerns. He and his family are now taking refuge in neighboring Pakistan. VOA's Ayaz Gul reports from Islamabad.
    Video

    Video Major Rubbish Burning Experiment Captures Destructive Greenhouse Gases

    The world’s first test to capture environmentally harmful carbon dioxide gases from the fumes of burning rubbish took place recently in Oslo, Norway. The successful experiment at the city's main incinerator plant, showcased a method for capturing most of the carbon dioxide. VOA’s Deborah Block has more.
    Video

    Video EU Visa Block Threatens To Derail EU-Turkey Migrant Deal

    Turkish citizens could soon benefit from visa-free travel to Europe as part of the recent deal between the EU and Ankara to stem the flow of refugees. In return, Turkey has pledged to keep the migrants on Turkish soil and crack down on those who are smuggling them. Brussels is set to publish its latest progress report Wednesday — but as Henry Ridgwell reports from London, many EU lawmakers are threatening to veto the deal over human rights concerns.
    Video

    Video Tensions Rising Ahead of South China Sea Ruling

    As the Philippines awaits an international arbitration ruling on a challenge to China's claims to nearly all of the South China Sea, it is already becoming clear that regardless of which way the decision goes, the dispute is intensifying. VOA’s Bill Ide has more from Beijing.
    Video

    Video Painting Captures President Lincoln Assassination Aftermath

    A newly restored painting captures the moments following President Abraham Lincoln’s assassination in 1865. It was recently unveiled at Ford’s Theatre in Washington, where America’s 16th president was shot. It is the only known painting by an eyewitness that captures the horror of that fateful night. VOA’s Julie Taboh tells us more about the painting and what it took to restore it to its original condition.
    Video

    Video Elephant Summit Results in $5M in Pledges, Presidential Support

    Attended and supported by three African presidents, a three-day anti-poaching summit has concluded in Kenya, resulting in $5 million in pledges and a united message to the world that elephants are worth more alive than dead. The summit culminated at the Nairobi National Park with the largest ivory burn in history. VOA’s Jill Craig attended the summit and has this report about the outcomes.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Ethiopia’s Drought Takes Toll on Children

    Ethiopia is dealing with its worst drought in decades, thanks to El Nino weather patterns. An estimated 10 million people urgently need food aid. Six million of them are children, whose development may be compromised without sufficient help, Marthe van der Wolf reports for VOA from the Metahara district.
    Video

    Video Little Havana - a Slice of Cuban Culture in Florida

    Hispanic culture permeates everything in Miami’s Little Havana area: elderly men playing dominoes as they discuss politics, cigar rollers deep at work, or Cuban exiles talking with presidential candidates at a Cuban coffee window. With the recent rapprochement between Cuba and United States, one can only expect stronger ties between South Florida and Cuba.
    Video

    Video California Republicans Weigh Presidential Choices Amid Protests

    Republican presidential candidates have been wooing local party leaders in California, a state that could be decisive in selecting the party's nominee for U.S. president. VOA's Mike O’Sullivan reports delegates to the California party convention have been evaluating choices, while front-runner Donald Trump drew hundreds of raucous protesters Friday.
    Video

    Video ‘The Lights of Africa’ - Through the Eyes of 54 Artists

    An exhibition bringing together the work of 54 African artists, one from each country, is touring the continent after debuting at COP21 in Paris. Called "Lumières d'Afrique," the show centers on access to electricity and, more figuratively, ideas that enlighten. Emilie Iob reports from Abidjan, the exhibition's first stop.

    Special Report

    Adrift The Invisible African Diaspora