Ghana's challenge

Having many resources but being poor is a paradox that many developing countries suffer: this is what has been called “the resource curse” by many reserachers and policy-makers who have tried to dwell into this apparent contradiction.
In an article in 2006, the American writer and columnist Thomas Friedman formulated “the first law of petrodollars”, where he took the “resource curse” further, linking it to the demise of democracy in oil-producing countries: using examples of Iran, Russia and Nigeria, he argued that higher oil income in these countries had provided money for regimes to buy off opponents, invest in security forces and censure the media.
Mr. Friedman’s argument is strong, considering that of all countries whose economy largely relies on oil (as a percentage of their GDP), not a single can be said to be democratic. In fact it can be said that some of these countries, as for instance Nigeria or Equatorial Guinea, have had deteriorating democracy or deteriorating conflicts situations after oil was found.
European and American companies had been drilling for oil for many years off the Ghanaian coast, as the prospects for oil were considered to be realistic, since the “black gold” has been found in nearby waters in Nigeria, São Tomé & Principe, Gabon and Equatorial Guinea. In June 2006 the British company Tullow announced that it had found oil off-shore in Ghanaian waters.
Ghana has been the success-story of West Africa for many years. While its regional neighbors have been fighting with conflicts, dictatorships and corruption, Ghana in December 2008 succesfully completed its third presidential election since the return to democracy in 1996, where the opposition National Demoratic Conress candidate, Mr. John Atta-Mills, won in a close contest against the candidate of the ruling party National Progress Party, Mr. Nana Akufo-Addo.
With a stable and growing economy, and being one of the few countries well underway to reach the millenium development goals of halving poverty by 2015, Ghana has been hailed as Africa’s hope and with the recent find of oil, the question of whether Ghana will succeed in managing its oil-riches, or become yet another failed African resource story, becomes evermore relevant as Ghanaians had pitted their hopes on the coming oil-riches, as mentioned by Kennedy Kelechi Halams: “I am concerned that a new corrupt rich class may emerge from Ghana’s oil wealth. I am concerned that the sanctity and tranquility of Ghana may become a thing of the past. These are my personal feelings. As I harbor these fears I just hope for the better. I hope and pray that the Ghanaians will utilize this gift from above for their betterment.”
The former Ghanaian president, John Kuffour, celebrated the oil-find, stating that Ghana was “going to fly”, since Ghana was already doing well, but many sceptics remain, pointing out that Ghana will still need to improve accountability and transparency in the extractive industries in order to manage the resources.
Historically, this has not always been easy for Ghana, who has often been compared to Malaysia: both countries gained independence from Britain in 1958, and had a similar socio-economic structure and were on a similar level of development. But while Malaysia embarked on a succesful development process, a series of military coups and rampant corruption shattered the high expectations for Ghana, who stagnated and in fact became poorer.
By the change of the century, Malaysia’s average income was tenfold that of Ghana.
Ghana’s primary export, cocoa, was after independence managed so badly that by the 1980’s the entire cocoa production had almost collapsed. However, massive reforms of the State Cocoa Board, has since re-established Ghana as one of the world’s most important cocoa-producing countries.
Other resources, notably timber, has been badly managed; deforestation has been a serious problem in Ghana, and corruption has been a huge problem in the timber sector.
On the other hand, Ghana’s questionable experiences when it comes to cocoa or timber may translate into positive appraoches for the oil sector. One huge advantage Ghana currently has over any other African country that has found oil is the strength of its democratic institutions and the mere fact that Ghanaians are actively debating the consequences of the prospective oil revenues, point to an open society that is aware of the risks.
Furthermore, although corruption has historically been a problem in Ghana, and still remains a problem, Ghanaians are rightfully proud of their record on anti-corruption: over the last ten years, the country has achieved steady improvement in Transparency Internationals’ Corruption Perception Index (CPI), and was in 2008 ranked as number 67 of 180 countries, ahead of Mexico, Brazil or China.
Ghana is not expected to start earning from its newfound oil until 2010, and only time will show whether Ghana can prove that oil may not be a curse, but a bleesing.