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

Philippines, Muslim Rebels Try to Salvage Peace Pact

Peace process faces major setback after botched military operation to find terrorists results in bloody gunbattle between government forces, Moro Islamic Liberation Front fighters More

Republicans Expect Long, Expensive Presidential Battle

Political strategist says eventual winner will be one who can put together strongest coalition of various conservative groups that make up Republican Party More

Video New Wheelchair Is Easier to Use, Increases Mobility

Engineers have come up with a lever-operated design that makes use of easily accessible bicycle technology More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Islamic State Prisoners Talk of Curiosity, God, Regreti
X
Zana Omer
March 28, 2015 1:19 AM
The Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

The Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Hi-tech Motorbike Helmet's Goal: Improve Road Safety

In cities with heavily congested traffic, people can get around much faster on a motorcycle than in a car. But a rider who is not sure of his route may have to stop to look at the map or consult a GPS. A Russian start-up company is working to make navigation easier for motorcyclists. Designers at Moscow-based LiveMap are developing a smart helmet with a built-in navigation system, head-mounted display and voice recognition. Zlatica Hoke has more.
Video

Video New Wheelchair Is Easier to Use, Increases Mobility

Traditional push-rim wheelchairs create a lot of stress for arm, shoulder and neck muscles and joints. A redesigned chair, based on readily available bicycle technology, radically increases mobility while reducing the physical effort. VOA’s George Putic reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video Virginia Tavern Takes Patrons Back to Medieval Times

European martial arts are not widely practiced and are unknown by most people. A tavern in Old Town Alexandria, outside Washington, wants to change this by promoting these fighting techniques from medieval times. Through combining visual arts, martial arts and culinary arts, this tavern brings medieval history back to life. VOA's Yang Lin and Helen Wu report.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More