Politics of Poverty

USA defeats Ghana in World Cup match, but can Ghana defeat the ‘Resource Curse’?

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Waste rock from a nearby mine is encroaching on the relocated village of Teberebie, Ghana. Communities relocated to make way for gold mines in Ghana struggle with loss of agricultural land, unemployment, and environmental damage. Photo: Neil Brander/Oxfam America

Will Ghana’s citizens actually benefit from the more than $20 billion the government is expected to receive from oil in the next 20 years?

Like so many of you, I cheered at home earlier this week as the USA’s Clint Dempsey scored the quickest goal of the World Cup so far, seconds after kick-off, and later as John Brooks put the US ahead of Ghana with an 86th-minute goal. The 2-1 victory over Ghana in the first round was significant, since the USA was eliminated by Ghana in the past two World Cups.

But the game also made me think about a much more important issue for Ghana than emerging from the so-called Group of Death: avoiding the “resource curse” that has plagued too many African nations.

You see, Ghana is Africa’s second largest gold producer. But Ghana, which traders named the Gold Coast due to its mineral wealth, hasn’t seen its hopes for the gold trade realized. Mining hasn’t transformed the country’s economy or addressed poverty. In fact, most of the gold money leaves the country, and the industry has seen human rights violations, pollution, land grabs, and conflict between security forces working for the mining companies and the local communities. Ghana is struggling to properly regulate the industry, and many people turn to illegal mining to support themselves – often at a terrible health and safety risk as they use toxic mercury in the process. Despite their mineral wealth, a quarter of Ghanaian citizens live in poverty.

In 2007, Ghana discovered oil in commercial quantities, and there is hope that this time, the profits from natural resources will be used to benefit the people of Ghana and fight poverty. In 2010, oil production began. The oil is expected to bring in an average of $1 billion per year from exports during the next two decades. If properly managed, imagine what $20 billion could do for those in poverty. Oil has now become the second largest export of Ghana behind gold, increasing from $2.7 billion in 2011 to $3 billion in 2012, and overtaking cocoa exports.

There is clearly a huge risk that these funds could be lost to greed, corruption and waste – fueling violence and instability, while failing to address poverty and development needs.

Oxfam America has been working with our partners in Ghana for years on extractive industry issues – making sure natural resources benefit Ghanaians, and they have the right to decide how these resources are developed. Ghana has taken big steps to try to avoid the “Nigerian model” and push the government to put strong transparency protections in place. The government has made a strong commitment to transparency and good management of these resources by passing a Petroleum Revenue Management Act (PRMA) in 2011 designed to make sure that payments between companies and the government are transparent.

“The hope of most Ghanaians is that oil and gas production will help accelerate the country’s efforts to reduce poverty, especially related to agricultural development, health and education,” said Richard Hato-Kuevor, Oxfam America’s program officer for extractive industries in Ghana.

“In spite of the inherent challenges in managing the new found oil wealth, Ghana is still considered a new paradigm of countries in Africa determined to break away from the resource curse,” he said.

As the Africa Centre for Energy Policy (ACECP) noted, Ghana has started showing signs of poor planning and spending decisions for oil revenues. According to ACEP, although it is too early to assess the impact of oil revenues, there is still some optimism for a changed course. My colleague Ian Gary notes that contracts are still awarded behind closed doors rather than through open and competitive bidding.

Another setback has come from the US, where Big Oil is fighting transparency. The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was a huge victory in Ghana and other resource-rich nations for making sure payments to governments transparent and citizens can hold their governments accountable, and fight corruption and waste. But the American Petroleum Institute and companies such as ExxonMobil and Shell have been fighting to block this rule, including through a legal case that sent the 2012 rule back to the SEC. Prominent civil society leaders in Ghana like Boakye Dankwa Boadi from WACAM, a human rights and environmental organization in Ghana, are concerned about this delay, and we here at Oxfam America, along with members of Congress, have called on the SEC to finish the rule by the end of the year.

To help, visit our natural resources rights page, or tell the SEC to protect transparency. You can also watch the documentary Big Men, which follows Ghana’s oil discovery and the debate over how to develop the reserves. The film compares Ghana to Nigeria, where despite vast quantities of oil, there is widespread corruption, poverty and violence.

While the World Cup is an exciting time for countries around the world, Ghana’s most important match right now isn’t in Brazil, but back home fighting poverty and corruption. If the oil wealth isn’t managed properly, it could fail to address the poverty or even make it worse. The question is whether this revenue will go to support sustainable and inclusive development.

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