College Social Sciences
Political Science
Ghana’s Fight on the Resource Curse
Will the best kid in class fail?
Bachelor Thesis
Student: Paul D. Pater
Studentnumber: 6051944
First supervisor: Katja Biedenkopf
Second supervisor: Julien Jeandesboz
Second reader: Rosa Sanchez Salgado
Date: June 27, 2014
1 Introduction ... 1
2 The Resource Curse ... 4
2.1 What causes the resource curse? ... 4
2.1.1 Economic Management and Performance ... 5
2.1.2 Society ... 6
2.1.3 Polity ... 8
2.1.4 Transparency ... 8
2.1.5 Building the Framework ... 10
2.2 What can government and civil society do to prevent the resource curse? ... 12
2.1.1 Economic Management and Performance ... 12
2.1.2 Society ... 13 2.1.3 Polity ... 14 2.1.4 Transparency ... 14
3 Ghana ... 16
3.1 Ghana’s polity ... 16 3.2 Ghana’s society ... 173.3 How do the government and civil society in Ghana try to prevent its political, social and economic system from being affected by the resource curse? ... 17
3.3.1 Economic Management and Performance ... 18
3.3.2 Society ... 20
3.3.3 Polity ... 20
3.3.3 Transparency ... 21
4 Conclusion ... 24
1
Introduction
In 2007 oil companies discovered a great amount of oil in Ghana, ready for commercial exploitation. The Jubilee Oil Field, 60 kilometres offshore in the Atlantic Ocean, supposedly holds two billion barrels of oil. The discovery of more fields in the following years increased Ghana’s reserve to approximately five to seven billion barrels of oil. This reserve puts the country among the 30 countries worldwide with the largest oil reserve. Ghana quickly started exploiting the oil in 2010. There was a widespread believe that these new found resources would bring wealth and prosperity to the country. Projections suggested that the country could quickly start to earn more than a billion dollars per year from this discovery of natural resources (Moss & Young, 2009). In 2013, Ghana even earned 1,4 billion from the exploitation, a substantial sum compared to the GDP of around 40 billion per year. The optimism following this discovery is clearly visible in the reaction of the former president of Ghana, John Kufuor:
"Even without oil, we are doing so well, already. Now, with oil as a shot in the arm, we're going to fly” (former president of Ghana, John Kufuor: 2007).
Ghana is not the first country to find itself in a position like this. Many countries have at some point in time found themselves in the situation of suddenly finding vast amount of natural resources within their country’s borders. These resources could be anything, from rare minerals to crude oil. The hopes and expectations among governments and societies are then usually high. Many developing countries thought this would be their way out of harrowing poverty. Sadly, this optimism proved wrong many times. The discovery of oil in Nigeria and the discovery of diamonds in Sierra Leone are perfect examples. These countries experienced a nation-wide economic, political and social setback following the exploitation and export of their natural resources.
This fairly counterintuitive effect is called the resource curse (or oil curse). The resource curse states that countries with abundance of resource tend to have worse economic development compared to countries that are not ‘blessed’ with large reserves of natural resources. Although a fair amount of research had already been published on natural resource abundance’s negative effect on political en economic performance, Richard M. Auty and Alyson Warhurst were the first to use the term resource curse in 1993:
“Compared with other DC (developing countries), [..] far from achieving a superior economic performance, the mineral economies have been less successful. The mineral economies
have slower rates of economic growth, lower levels of social welfare and more highly skewed income distributions than the non-mineral DCs. In fact, the superior resource base of the mineral economies has been more of a curse than a blessing” (Auty & Warhurst, 1993).
The development of this theory came after decennia of globalisation of the world economy, and the rapid growth in trade between countries worldwide. After a number of years, researchers like Auty started to notice the pitfalls in the abundant availability of natural resources in a country. Auty’s thesis was specifically focused on mineral resources’ impact on economic development. In this thesis, a more comprehensive view of the resource curse will be used. Broad definitions are found across a lot of academic literature over the past years, like the explanation Van Alstine (2014) gave in her article:
“[..] the complex and somewhat paradoxical situation whereby countries with significant levels of non-renewable natural resources and therefore potential wealth often perform less well in terms of economic, environmental, and human development performance than their peers” (Van Alstine, 2014).
This thesis will not only discuss the resource curse in general, but will apply the current knowledge of the curse on the economic and political situation in the Republic of Ghana, a fairly developed West-African democracy. Ghana has always been seen as the ‘best kid in class’. Compared to other developing African countries, it has seen economic development in a stable political environment for the last decades. Considering the lack of academic literature covering a continent-wide comparison on the subject of economic, social and political stability and development, the Failed State Index (FSI) can be used as a comprehensive study to back up this claim. The FSI is published annually by the United States think-tank Fund for Peace and the magazine Foreign Policy. It uses 12 factors1 to assess the ranking of a country, considering their economic, social and political status. Ghana ranks 110 amongst 178 countries worldwide, with rank 1 being the most failed state. Ghana ranks third compared to the rest of Africa, only scoring slightly lower than South Africa and Botswana. But the resource curse might be the biggest challenge the country has ever faced.
1
Social: 1 Mounting demographic pressures 2 Massive movement of refugees or internally
displaced persons 3 Vengeance-seeking group grievance 4 Chronic and sustained humand flight;
Economic: 5 Uneven economic development 6 Poverty, sharp or severe economic decline;
Political: 7 Legitimacy of the state 8 Progressive detoriation of public services 9 Violation of
human rights and rule of law 10 Security apparatus 11 Rise of factionalized elites 12 Intervention of
external actors
But what has Ghana done to prevent the country from being gripped by the resource curse? Have they actually even done anything, or are they just as vulnerable as previous victims to the curse? Civil society and government are countervailing as well as complementary powers in the prevention of the resource curse. It could be expected that the government and civil society have to take comprehensive precautions to prevent their country from being the next victim. This brings us to the main question of this thesis:
How do the government and civil society in Ghana try to prevent its political and economic system from being affected by the resource curse?
The thesis attempts to answers this question in multiple steps and will be divided into two parts. The first part will be on the resource curse itself. To begin with, this thesis looks into the actual factors that cause the resource curse from a theoretical perspective. What are the actual reasons that a country cannot positively turn the money earned with natural resources into wealth and prosperity throughout the country? When the factors have been unravelled, the next step is to investigate the possibilities that government and civil society have in fighting those different factors. This thesis will examine the factors that literature has provided and will attempt to create an analytical framework for governments and civil societies. This framework will explore the practical opportunities they have in fighting the resource curse. The second part of this thesis will look further into the case of Ghana. First by analysing the existing political system, including the activities of civil society actors. Second, by reviewing the actual steps taken by the Ghanaian government and civil society, reflecting on the mechanisms and opportunities described in the first part of the thesis.
2
The Resource Curse
2.1
What causes the resource curse?
Academic literature shows an on-going interest in the resource curse. Although there is an abundant amount of research on the subject, there has never been a consensus on a clear framework for analysing the causes of the curse. Through assessing literature, several recurrent factors are used to create an analytical framework. Before this framework can be put together, clear oversight is need on what mechanisms play a role with the resource curse. In other words: what are the causes of the resource curse?
When a country discovers a vast amount of resources, it has a chance of becoming a victim of the resource curse. The resource curse should be seen as the final negative output for a country. The result of a failing government and civil society, ending in a country’s development stalling or even being set back. The curse is not a mechanism in itself, but comprehend several different factors and mechanisms. We need to identify the factors that are essential in this regard. Andrew Rosser (Rosser, 2006) published a literature review on the Political Economy of the Resource Curse. He identifies a number of factors on which several academic authors agreed upon. In addition, more recent articles are used to improve and complete Rosser’s framework to our own needs and wishes. In his review, Rosser categorises previous literature on the resource curse. He divides the causes of the resource curse in three categories: economic performance, civil war, and regime type. Civil war and regime type will be placed in broader perspective, respectively society and polity. In more recent literature, transparency was identified as a fourth factor concerning the resource curse (e.g. (Kolstad & Wiig, 2009) (Van Alstine, 2014) (Williams, 2011)). This makes the list of the following four factors, researched in this paper:
• Economic Management and Performance • Society (social conflict & civil war)
• Polity (regime type) • Transparency
Natural resource abundance has been proven to be closely related to negative effects on these four political and economic. These four factors will be used in this thesis as guidance for
researching Ghana’s situation. The following subsections will discuss the four factors in greater detail.
2.1.1
Economic Management and Performance
During prosperous times, a successful government focuses on macroeconomic management and poverty reduction. But negative changes in society and polity will effect the economic management and performance of a country. Natural resource abundance can change this situation into macroeconomic instability, unequal wealth distribution and export concentration (Moss & Young, 2009). What conditions are necessary to prevent good economic management from falling into mismanagement? Literature tells us that in conditions like this, bad economic management causes bad economic performance. But there are many different perspectives on what the underlying cause of bad economic management is. Rosser reviews 5 different perspectives: behavioralist, rational actor, state-centred, historico-structuralist and social capital (Rosser, 2006).
1. The behavioralist perspective focuses on emotional and irrational behaviour of political actors, especially in the elite, caused through the sudden abundance of resources the a country possesses. Wishful thinking and excessive optimism (as described in the introduction) could lead to bad economic management.
2. The rational actor perspective focuses on political (elite) actors as well, but views the exploitation of resources and the overflow of money in a government as a rational incentive for actors to ‘line their own pockets’. This rational behaviour may lead to extensive corruption.
3. The state-centred perspective points out the effect of the emergence of a ‘rentier state’, which is a state ‘that receives regular or substantial amounts of ‘unearned’ income in the form of, for instance, taxes on natural resource exports or royalties on natural resource production (Rosser, 2006). ’The shifting focus of the government to a more distributive institution puts emphasis on the welfare state, but could make the government lose attention to economic regulation and management.
4. The historico-structuralist perspective emphasises the structural effects that natural resource abundance can have on a country’s society. Researchers of this perspective have focused on the natural resource abundance’s ‘effect on the relative power of different social
groups or classes’ (Rosser, 2006). Because the start of the exploitation in Ghana is fairly recent, it will not be possible to research this perspective at this moment in time.
5. The social capital perspective points out the possible undermining of social cohesion by natural resource abundance. The resources are usually owned by the ‘lucky few’, which creates social tensions especially in economically harsh times. The lack of social cohesion also undermines the government’s capacity for economic management. Research can show how the ownership of the resources in a country is divided, and predict possible frictions in the social cohesion of the country, but for Ghana it is too early to say whether or not social cohesion has deteriorated because of the natural resource abundance.
As stated above, this paper will only explore four out of five perspectives given by Rosser. The historico-structuralist perspective will not be discussed further in this thesis, for the given reason. Chapter 2.2 will explore the possibilities of fighting these four mechanisms, and chapter 3.3 will research what Ghanaian government and civil society have already done to fight these causes of bad economic performance.
2.1.2 Society
One of the main tasks of governments is to keep a country safe and at peace. Not only from external threats, but also internally. Social unrest could easily disrupt standing political institutions and social wellbeing. According to the Organisation for Economic Co-operation and Development (OECD), there are three main causes for social unrest (Jovanovic, Renn, & Schroter, 2011):
1. Financial/ Economic Crises 2. Human Health
3. Critical Infrastructure
In the worst case, societal unrest leads to civil war. Rosser’s second factor links natural resources to civil war. It is clear that civil war will always have a negative impact on the stability of a country’s economic and political system, thereby causing a decrease in development. Rosser divides the subject in four parts: the onset, duration, intensity, and type of civil war. As there is currently no civil war going on in Ghana, only the onset and type of civil war are relevant.
There are two main arguments in academic literature on the causes of civil wars: grievance and greed. The first cause of civil war is collective grudge (or grievance) concerning the unequal distribution of wealth, which is linked to diminishing social cohesion. The second cause of civil war is greed, thus an economic incentive. Minorities are looking for enrichment for their own group through opposing the government (Rosser, 2006). Collier & Hoeffler did econometric research on greed and opportunity as the cause of rebellion, and have shown that ‘primary commodity exports substantially increase conflict risk.’ They call this the availability of finance (Collier & Hoeffler, 2004). Another factor Collier & Hoeffler name is the ‘cost of rebellion’. In short, this deals with how much a person ‘has to lose’. When people are higher educated, have better incomes and brighter possibilities and dreams for the future, their cost will be higher to start rebelling.
The type of civil war is said to be dependent on a couple of factors concerning the characteristics of the resource. Rosser states two essential characteristics of resources. First, the proximity of the resources to the country’s capital city. Second, the spread of the resources: are they diffuse or point resources. This leads to four different types of war (Rosser, 2006):
• Conflicts over state control: point resources that are close to the capital. • Separatist conflicts: point resources that are distant from the capital. • Rebellions and rioting: diffuse resources that are close to the capital. • Warlordism: diffuse resources that are distant from the capital.
The Ghanaian oil fields are point source (unlootable) resources, located near Accra, the capital of Ghana. These kind of resources are associated ‘with conflicts over state control’ (Rosser, 2006). In additition, Rosser adds that unlootable resources are more vulnerable to separatist conflicts because of the skills needed for the extraction, but a separatist conflict in Ghana seems highly unlikely cue to the proximity of the resources to the capital.
The discovery of oil could lead to changes and frictions within society. Grievances and greed can arise within different groups. Societal conflict, at worst leading to civil war, has a direct negative effect on the possibilities of effective economic management of a government. Ineffective management leads to poor performance, which would mean the resource curse would have taken a grip on a country through society.
2.1.3 Polity
The polity referred to in this thesis is the state. States can take on endless different forms, depending on a country’s historical development. In modern times, abundant resources are known to negatively effect democracy.
The idea of natural resource abundance turning democracy into authoritarianism has been around in academic literature since the 1970s. ‘In the end of the twentieth century, a scholarly consensus emerged around the idea that oil fuels authoritarianism’ (Brooks & Kurtz, 2013). This turn in polity can be mainly explained by the new distribution of wealth, and effects that derive from it. In the last decade, this theory has been proven shaky in literature several times.
Haber & Menaldo published an article in which they used historical datasets in search for a long-term relationship between natural resource abundance and rising authoritarianism in a country. They found that ‘increases in resource reliance are not associated with authoritarianism’ (Haber & Menaldo, 2011). Brookz & Kurtz developed similar findings in their recent article on whether oil and democracy can mix, in which they conclude that it is a possibility that they do. They deny the direct link between abundant resource and democracy, as there are more exogenous factors that will affect the democratic level in a country. They found that ‘oil is not in itself a curse, and that the extent of democracy in one nation is predicted significantly by the democratic tendencies among regional peers’ (Brooks & Kurtz, 2013). Although critique has been developed on the direct link between natural resource abundance and authoritarianism,it can still be assumed that the natural resource abundance can have a negative influence on democracy. Although it might not ultimately and inevitably lead to an authoritarian regime, the influence of abundant resources can make democratic processes more troubled, as Rosser points out in his literature review.
Rosser’s third factor is on the regime type of a country, more specifically on the negative effects of natural resources on democracy or democratization. He discusses four different explanations for the causal mechanism linking regime type with natural resources, which will be the basis of our further research on regime type. The first explanation suggests that governments can use wealth resulting from the exploitation of resources to reduce pressures from society in favour of democratization. The government becomes less reliant on taxes, which makes it harder for society to hold government accountable. The second argument states that rentier states can afford more expenditure on internal security, to reduce the chance of effective political opposition. The third
argument states that the newly generated wealth can be used by a regime to consolidate itself, making it more likely for oppositional parties to use non-constitutional ways of pursuing power, for example through a civil war. The fourth and last explanation suggests that the generated wealth hinders social and cultural changes that are essential for democratization, such as education (Rosser, 2006).
Only the first and second mechanism relating regime type and natural resource abundance can be explored further in this thesis. The first is hard to research empirically, but can be researched broadly to see if there is a broad tendency in Ghana where society is losing its interest in its own democratic system. For the second argument, the annual budget of internal security expenditure could be used, although an increased expenditure might not yet show because of the recentness of events, and does not immediately have to mean that opposition has less chances of having themselves heard. The third and fourth arguments are not suited for research as the exploitation of oil only started a couple of years ago.
2.1.4
Transparency
The fourth factor in our framework is transparency. This factor is different from the other three factors, as it is not a factor that eventually leads to the resource curse itself. Transparency is affected in different ways by the discovery of oil, as will be discussed later. But more importantly, transparency is a strategy for government and civil society to influence the mechanism causing the resource curse. Government and civil society can use transparency as a tool to influence the effect the discovery of oil has on the polity and society. Rosser only lightly touches the subject, whilst recent literature has broadly discussed the lack of transparency as a main trap for governments and another cause for the resource curse. When a government lacks transparency whilst exploiting its oil fields, the road lies open for corruption and the diminishment of democratic standards. By lacking or losing transparency, the accountability of the government to the citizens will decrease. More in general, the loss of transparency and accountability ‘can be interpreted as a break-down in the social contract between citizens and the state’ (Moss & Young, 2009). Williams states in his 2011 article on the relationship on natural resources and transparency that the two most well known and most widely spread attempts to improve transparency in resource rich countries, Extractive Industries Transparency Initiative (EITI) and “Publish What You Pay” (PWYP), ‘assume that it is the abundance of natural resources [..] that is driving the lack of transparency, because without the large revenues being earned from these resources there is less reason for the government to hide anything from its citizens’ (Williams, 2011). This general view of the effect of
transparency is still under discussion and has not been accepted throughout the entire academic population, but will be taken for granted for the purpose of this paper. Ivar Kolstad and Arne Wiig (Kolstad & Wiig, 2009) point out six negative effects the lack of transparency can have on a country:
• A lack of transparency makes corruption less risky and more attractive.
• A lack of transparency makes it harder to use incentives to make public officials act cleanly. • A lack of transparency makes it hard to select the most honest and efficient people for
public sector positions or as contract partners.
• Informational advantages give access to rents, making reform difficult.
• A lack of transparency makes cooperation more difficult to sustain, and opportunistic rent seeking more likely.
• A lack of transparency may undermine social norms and reduce trust.
2.1.5
Building the Framework
From reviewing the four factors concerning the resource curse, a framework can be created through which it will be possible to analytically assess the mechanisms that drive the curse. The discovery of oil leads to negative changes in the polity (regime type) and society (conflicts & civil war). Degradation of these factors could lead to bad economic management and performance. Worsened economic performance could lead to more societal conflict in return, which makes economic management an even bigger challenge. This could eventually cause the resource curse to become reality. As the previous descriptions have shown, transparency could be used by civil society and government as a strategy for fighting the negative causes the discovery of oil has on a country’s polity and society. Civil society has the important task of continuously challenging the government in maintaining its transparency. This brings us to our own framework for the remaining of this thesis:
This thesis will further discuss what government and civil society can do to positively influence this chain of events in order to avoid the resource curse. To answer the research question, the actions taken by Ghana’s government and civil society will be explored and assessed.
2.2
What can government and civil society do to prevent the resource curse?
There is a clear distinction between government and civil society. According to Foley & Edwards, civil society is ‘understood as the realm of private voluntary association, from neighborhood committees to interest groups to philanthropic enterprises of all sorts’ (Foley & Edwards, 1996). Where as civil society comprises private voluntary associations, government refers more to the system in which power is institutionalised. As the Blackwell Dictionary of Political Science says, government is the ‘particular executive in control of a state at a given time’.
In a country with sudden natural resource abundance, one would expect government and civil society to attend to the 4 factors discussed. Literature has proposed a wide range of options for dealing with the resource curse. This section deals with the possibilities government and civil society have, based on the four factors discussed in the previous section.
2.2.1
Economic Management and Performance
The effectiveness of economic management is heavily dependable on the experience of government and civil society on managing natural resources. When a country has experience in and exploiting and exporting, there is more knowledge available and simple pitfalls can be avoided. Furthermore, there are probably more institutions in place to guide economic management in an effective and justified manner. Civil society plays an important role in the creation of these institutions and legislation, as they prevent the government from degrading economic management into unwilling forms. Rosser’s different perspectives provide further insights in the factor of economic management. Both excessive optimism (behaviouralist perspective) and corruption (rational actor perspective) can be framed through active interaction between civil society and the government. As long as new legislation is highly responsive to civil society, government actors can be efficiently tamed. The state-centred perspective advocates that natural resource abundance leads to a decreased capacity of government to promote economic development. This can be countered by the government through making sure that their distributive task does not get ahead of their regulation and supervision of the economy and domestic taxation. Longstanding institutions of a regime will be better in upholding this focus than relatively new ones, so the country’s history on institutionalizing regulation and supervision will be key in maintaining good economic management. The social capital perspective can best be countered by making sure everyone benefits, without people feeling left out of the new source of wealth. This can be compared to the ‘cost of rebellion’
(Collier & Hoeffler, 2004), to be discussed under Civil War. Societal unrest could be caused when citizens see the distribution of ownership and wealth as unfair, causing social capital to decrease. It is the task of the government to guide the wealth for the benefit all inhabitants of their country.
2.2.2 Society
It is mainly the task of the government to prevent social unrest. Civil society groups have two faces in this respect. By pleading their own cause, they simultaneously support good governance but also create fractions within a country. Government should govern this process, and make sure that escalation doesn’t occur. ‘Social unrest is the result of a dynamic process that includes various stages of escalation’ (Jovanovic, Renn, & Schroter, 2011). The OECD makes some recommendations on how governments can prevent and control social unrest, of which two stand out. Their framework should be integrative & global, and participative & open (Jovanovic, Renn, & Schroter, 2011). The integrative and global factors should be addressed by government policy makers, through interaction with civil society in a participative and open manner (transparency).
Government can prevent Rosser’s two causes of civil war by good economic, political and social management. In preventing civil war, government has a bigger role than civil society. The first cause, ‘grievances stemming from inequalities of wealth, limited political rights, or ethnic and religious divisions’ (Rosser, 2006), will not be a risk following from the abundant oil when the inequality of wealth is managed well. This is a responsibility of the government, and civil society can play a big role in this. Pressure groups could make sure that the new wealth from the resources is spent in a fair manner by the government. The factors of economic management and transparency are highly relevant for preventing this cause of civil war. The second cause, ‘economic incentives and opportunities facing rebel organisations’ (Rosser, 2006), might be harder to govern. The ‘availability of finance’ (Collier & Hoeffler, 2004) will obviously increase rapidly due to the new resources. Government’s income will rise, as the wealth generated from the abundant resources is extra, on top of the already existing monetary situation. It is the government’s responsibility to equally distribute this wealth throughout the community, making sure everybody benefits. One way of doing this is by increasing welfare spending, which will naturally increase the ‘cost of rebellion’ (Collier & Hoeffler, 2004) as well. The ‘cost of rebellion’ is ‘what a person has to give up’ to start rebellion. When people have nothing to lose, the chance of rebellion is higher than for people that have jobs and families to live for. When the new money is for example spent on education and income levelling, citizens are less likely to start rebelling.
2.2.3 Polity
In preventing government’s decline in democratic standards, civil society is the key actor. In all four explanations Rosser describes, governments have the possibilities of undermining their own democracy. In the first cause, the government becomes less reliant on taxes, so accountability to their citizens decreases. Civil society can make sure accountability for the income from resources is as high as from rents, to uphold government’s responsiveness to society. The second factor is the expenditure on internal security. This factor alone is not a decrease in democracy, but could lead to a reduction of effective political opposition. When parliament and civil society continue to deliberate on all issues and effective participation (Dahl, 1998) and free press is upheld, extra expenditure in internal security will not lead to a decrease of political power of the opposition. Civil society can continuously act towards the government as a counterweight in securing democratic inclusion and free press.
2.2.4
Transparency
Creating and upholding transparency for the cause of fighting the resource curse is a shared responsibility of government and civil society. Both actors working together will eventually lead to the best outcome. The government has to be open to initiatives from civil society to maintain a transparent regime. Civil society has the important task to continuously challenge the government to maintain transparency. The main task of government in fighting the negative effects of the lack of transparency is in creating institutionalised transparency during the creation of regulations and jurisdiction. ‘Transparency has been viewed as a key factor in reducing corruption and other dysfunctions in natural resource-rich countries’ (Kolstad & Wiig, 2009). Because of this widespread believe that transparency is key in fighting the resource curse, several international initiatives have seen the light over the last decades. Recently Van Alstine published an article on the relationship of transparency and resource governance, focused on Sub-Saharan Africa (Van Alstine, 2014). Transparency has been on the resource governance agenda since the 1990s “because of intersecting “ideas” promoted by transnational networks concerned with corruption, conflict, and corporate social responsibility” (Van Alstine, 2014). This had led to the creation of multiple institutions attempting to promote transparency. As mentioned above, the EITI and PWYP are the most well know and wide spread initiatives in promoting transparency in resource rich developing
countries. These campaigns ‘have sought to institutionalize transparency in resource governance’ (Van Alstine, 2014). This international campaign is a way for countries encountering abundant resources to institutionalize transparency through international experience and standards, without having to reinvent the wheel.
3 Ghana
Before being able to research the actions that are taken, or have to be taken, an introduction is needed of Ghana’s political system and civil society.
3.1
Ghana’s polity
According to the Oxford Dictionary, a polity is ‘a form or process of civil government or constitution’. Ghana’s polity is a result of a historic process. Ghana had been an independent country for exactly 50 years in 2007 when the oil was found, after being a colony for Great Britain for almost 60 years. The groundwork for today’s polity started in 1992, when the first elections were held and the country turned into a democratic state. Democracy in Ghana has survived 5 subsequent peaceful elections since 1992, resulting in a stable political environment. The elections have grown in reliability every time, and consistently over 70 per cent of the citizens voted. ‘The country’s key democratic institutions – the judiciary, Commission on Human Rights and Administrative Justice (CHRAJ) and parliament – continue to develop and solidify, and media freedoms and respect for human rights have expanded from one election to the next’ (Arthur, 2010). Though being a relatively young democracy, several ‘flawless’ opposition takeovers in parliament have proven the democratic stability. The democracy has been in a steady process of consolidating since the start. The institutional power is divided between a president, parliament, cabinet, council of state and the courts. This division of power has been consolidated since the beginning of democracy in 1992. ‘Ghana has been able to deepen to deepen democratic openings and processes and been able to bring pressure to bear on government officials and political leaders, through the reinforcement of structures of accountability within core political and constitutionally established institutions as well as between the state and civil society’ (Arthur, 2010). Ghana’s polity can be considered a democracy, and should be treated like that when researching the resource curse. Transparency is institutionalised, and that should be the starting point when researching the oil discovery’s effect on Ghana’s polity.
3.2
Ghana’s society
Ghana’s society comprises around 25 million citizens. There are around 63 ethnical groups living in the country, with Akan being the largest group comprising almost half of the country’s inhabitants. Christianity and Islam are the biggest religions, with the south of the country dominated by Christians and the north by Muslims. The country has seen no external or internal wars since independence. The north has had some regional unrest in the past, but these conflicts never escalated. The country’s steady development, economically as well as political, creates a growing trust in its own future. The democratic foundations in the country lead to the creation of a successful social contract: ‘that citizens give up rights and pay taxes in order to receive the benefits of social order and public services’ (Moore, 1966).
In a successful democratic polity, is can be expected that society plays a critical role. Democratic consolidation is only possible when civil society actively acts as a counterweight and motivator of the government. ‘The achievements and accomplishments of Ghana’s democratic consolidation process have been aided to a large extent by the dramatic improvement in the political space for expression and representation’ (Arthur, 2010). This has lead to the emergence of a broad variety of civil society organisations (CSOs), playing an important role in the elections and the making of legislation. ‘CSOs are making a significant contribution to the Ghanaian policy terrain by calling for and ensuring transparency in the political and policy-making process’ (Arthur, 2010).
3.3
How do the government and civil society in Ghana try to prevent its political, social and economic system from being affected by the resource curse?
With the abundance of literature and experience in other countries on dealing with the resource curse, one would expect government and civil society in Ghana to be actively trying to prevent the country from being affected by the resource curse. The current situation in Ghana, as well as cautious predictions, will be discussed following the four factors previously described: economic management and performance, society, polity and transparency.
3.3.1
Economic management and performance
Ghana’s economic management has been a relative success since the beginning of the 80’s, compared to similar post-colonial Sub-Saharan countries. They have been named ‘best kid in class’ because of their development. ‘Ghana has liberalized economic controls and generally put in place measures to encourage higher economic growth, attract investment, and promote diversification’ (Moss & Young, 2009). The country has had a steady average growth of 5,1% per year for the last decade (Moss & Young, 2009). But the discovery of oil will probably be the biggest challenge Ghanaian government has faced. To assess the risks of the resource curse following this discovery, the current conditions in Ghana are essential. What role do government and civil society currently play in the economic management of Ghana?
Economic management hasn’t always been as successful as wished for. Economic (and political) management of resources has been marginal and never succeeded to live up to the high expectations of prosperity that could have been earned from Ghana’s natural resources (Gyimah-Boadi & Kwasi Prempeh, 2012). Ghana has relied on export since the early colonial period. Before the discovery of oil, mining was an important share of Ghana’s export, as well as cacao and timber. When the oil was discovered in 2007, the urge for good legislation rose sharply. Though economic management wasn’t always successful, the experience with non-oil resources made Ghana relatively prepared to coping with the oil. ‘Ghana is not new to resource wealth. Since the early colonial period, it has depended heavily on proceeds from the export of gold and other minerals, timber, and cacao beans’ (Gyimah-Boadi & Kwasi Prempeh, 2012). Research shows that previous experience in other resources increases the chance of good economic management in a country suddenly exploiting large amounts of oil. Powerful constituencies rooted in non-oil tradeable sectors may have also played a role in the relatively good management of natural resources in Chile, Malaysia, and Indonesia (Gelb & Grassman, 2009).
Democracy in Ghana has survived 5 subsequent peaceful elections since 1992, resulting in a stable political environment. The country is also praised for its freedom of press, which is considered one of the most important institutions according to Dahl. In his book On Democracy, he states that ‘freedom of expression is required in order for citizens to participate effectively in political life’ (Dahl, 1998). According to Moss & Young, Ghanaian citizens ‘enjoy a high level of freedom in the media, speech, and political associations’ (Moss & Young, 2009). This freedom is one of the reasons civil society can play an active role in the government’s decision making. It is
clear from approved legislation that government and civil society have worked together on the economic management of the oil revenue. With the discovery of the oil, civil society bundled the normally splintered powers into collective action (Gyimah-Boadi & Kwasi Prempeh, 2012). The lack of a legislative and juridical framework alarmed groups, and made them put up their voice in support of government actions. ‘The Civil Society Platform on Oil and Gas (CSPOG) emerged as a key actor in March 2010 to unite civil society under one banner’ (Van Alstine, 2014). This Platform and the media have played an important role in the creation and adjustment of several parliaments’ bills concerning the oil. The Petroleum Revenue Management Act (PRMA), Petroleum Exploration and Production Bill (PEPB) and the Petroleum Commission Act (PCA) are three important bills from 2011 in which civil society ensured that independent control would regulate the oil industry. Besides civil society pressure groups, Ghana shows a live community of (sometimes publicly funded) think tanks. Frank Louis Kwaku Ohemeng researched the effectiveness of these think tanks in Ghana on economic management and development. Although Ohemeng doubts the overall effect think tanks have, he concludes that there is one ‘economic policy area in which think tanks have contributed significantly [..], that of the development and passing into law of the Petroleum Revenue Management Act’ (Ohemeng, 2014).
But what does all this action taken by civil society mean for the chance of the resource curse occurring though bad economic management and performance? The above-described situation seems to prevent the behavioralist and rational actor perspectives discussed by Rosser to become reality. As stated above, both excessive optimism and corruption can be fought through active interaction between civil society and the government. As long as new legislation is highly responsive to civil society, government actors can be efficiently guided to good legislation. The PRMA is an essential bill in monitoring the revenues from the oil fields, and thereby will prevent political actors from getting incentives to enrich themselves through the new flow of money. Civil society has also ensured independent control over the regulation of the oil companies (Gyimah-Boadi & Kwasi Prempeh, 2012). Transparency has shown to be effectively integrated into economic management, and has proven to be incorporated in new regulations regarding the oil. Not so much can be said about the effectiveness of these regulations yet, but the realisation of a legislative framework for future economic management of the oil revenues shows that Ghana’s civil society and government are on route to prevent the resource curse affecting their economic management.
3.3.2 Society
Social unrest in Ghana seems unlikely, as the country has a good historical track record and has been managing their economic, political and social affairs well so far. The social contract in Ghana is still intact, and hasn’t shown any large degrading yet following the oil discovery. Civil war seems highly unlikely in the short term, as the country has been ‘highly stable politically since 1981, [..] with neither a civil war nor any violent conflict with foreign powers’ (Moss & Young, 2009). Conflict over state control seems to be easily avoidable by Ghanaian government.
As stated before, government can prevent Rosser’s two causes of civil war by good economic, political and social management. Most importantly, greed and grievance can be avoided through fair distribution of the wealth. Since the start of exploitation, civil society and government have collectively created the Petroleum Revenue Act. The PRA is based on global experience from several other countries like Norway and the US (Alaska). This bill regulates the income and its distribution. ‘The law outlines clear mechanisms for collecting and distributing petroleum revenue. It specifies what percentage should help fund the annual budget, what should be set aside for future generations and what should be invested for a rainy day’ (Dovi, 2013).
At this point in time, there is not much government and civil society can do better in preventing civil unrest. Legislation is in place to distribute the wealth and avoid greed and grievance within societal groups. Government should nevertheless continuously monitor the chances of the problems with the financial or economic situation, human health, and the country’s critical infrastructure (Jovanovic, Renn, & Schroter, 2011). This monitoring should be integrative and global at the same time. Global experience should be used on a local scale. The creation of the PRA is a good example of converting universal experience into local regulation. Openness (or transparency) of this monitoring is important, as it gives civil society a chance to point out possible tensions in an early stage (Jovanovic, Renn, & Schroter, 2011).
3.3.3 Polity
Ghana’s democratic polity has been consolidating itself since the first elections in 1992, and has not shown clear signs of wearing down since 2007. This does not mean that the effects of the oil
discovery can’t still have an effect in the future. In fighting the (delayed) effects of oil discovery, civil society should support government in maintaining their democratic standards.
Civil society has enforced political institutions throughout the years, ensuring independent and constitutionally rooted institutions. But despite these institutions, which should provide clear division of power, ‘the constitution ensures the supremacy of the presidency over Parliament’ (Gyimah-Boadi & Kwasi Prempeh, 2012). Although democratically chosen, once the president is in power he or she can reign in a particularly free manner. The constitution in place created a political system of patronage, ‘a constitutional framework and legislative tradition that vests vastly disproportionate power and control of resources in the hands of the president’ (Gyimah-Boadi & Kwasi Prempeh, 2012). As long as elections are held periodically and freedom of press is upheld, the president will be held accountable for all actions he undertakes during his reign. Would these factors be effected, by the president’s actions or not, the system of checks and balances would be totally off and could possibly lead to a authoritarian type of polity.
3.3.4
Transparency
Ghana has developed high standards of transparency, especially since civil society realized the need for it to ensure good governance over the newfound resources. As discussed throughout this article, transparency is key in fighting the resource curse, and in upholding the democratic accountability of a government.
As with economic management, prior institutions and regulations on transparency are highly influential on the effectiveness of governments’ and civil society’s success in fighting the resource curse. As Moss and Young conclude after researching previous countries struggling with transparency, ‘one particular factor that stands out is pre-colonial institutions that enabled citizens to hold government accountable’ (Moss & Young, 2009). Because English colonisation was quite limited, Ghana’s institutions could continue. More specifically, the institutions in place at the moment of oil discovery are of great importance. If a country already has regulation in place for a transparent government, it will increase chances of transparent management of the oil revenues. Again Moss & Young conclude this from researching other countries. ‘Thus, despite innumerable differences between Norway and Botswana, both countries inherited conditions, prior to discovering their natural wealth, whereby incentives of political actors were set by strong
democratic institutions and empowered constituents with an interest in responsible resource management’ (Moss & Young, 2009).
When the oil was discovered, civil society became more active than ever before, and played a big role in the realisation of regulation. ‘The involvement of organized civil society and the media throughout the legislative process made the development of the initial legal framework for oil governance in Ghana exceptionally participatory and transparent’ (Gyimah-Boadi & Kwasi Prempeh, 2012).
The most important campaign in favour of transparency already in place before the discovery of oil is the PWYP. The PWYP is a civil society campaign that began in 2002 in London, and has evolved into an international coalition of more than 650 civil society organisations. ‘It calls for mandatory transparency of company payments and government revenues, government expenditures, and contracts and licensing procedures in the extractive industries’ (Van Alstine, 2014). It is an advocacy network mainly supporting the EITI, which is a voluntary international standard that ‘seeks to strengthen transparency and accountability through the disclosure of company payments and government revenues’ (Van Alstine, 2014). Governments themselves implement the EITI, but civil society plays an important role in the realization of this step. Institutionalization of transparency has proven to be the key in maintaining a transparent government, and the EITI is an international standard in which developing countries can participate. One of the unique aspects about Ghana is that it had already established an active PWYP coalition and was an EITI candidate country for its mining sector when offshore oil was discovered in 2007 (Van Alstine, 2014).
The PWYP campaign and the EITI candidacy were already in place to promote transparency in Ghanaian government. This institutionalization of transparency mechanisms was thus fairly developed in Ghana. As Moss & Young showed, institutions already in place before the discovery considerably increase the effectiveness of transparency in the following years. ‘The EITI framework will be helpful in Ghana’s case, and some of the lessons learned from its experience in the mining sector can be applied to oil’ (Moss & Young, 2009).
Civil society largely contributed to the creation of transparency in Ghana. The interplay between PWYP-Ghana and the Ghana EITI (GHEITI) demonstrates the important role that civil society has played in GHEITI’s institutionalization process’ (Van Alstine, 2014). In 2010, another civil society group emerged: the Civil Society Platform on Oil and Gas (CSPOG). ‘CSPOG seeks to provide a
common voice for civil society’ (Van Alstine, 2014). PWYP-Ghana and CSPOG’s show the deepened interest and power of civil society. ‘This complementary action is crucial for the institutionalization of the transparency and resource governance agenda in Ghana’ (Van Alstine, 2014).
4
Conclusion
This paper touches upon different subjects, all regarding topics of the resource curse and its possible effects on Ghana. First, this thesis names four factors that are most influential in the effects of oil discovery on a country. Second, the mechanisms for government and civil society for managing these effects have been identified. Third, Ghana’s current situation on fighting the resource curse has been discussed.
In doing so, this paper created a framework of the opportunities government and civil society have to fight the resource curse, and applies this framework to Ghana. Transparency has been identified as the main strategy to counter the negative effects of oil discovery on the other factors.
Literature attempts to capture lessons from every country experiencing sudden resource abundance. This thesis reviews these lessons specifically targeted on Ghana’s economic, social and political situation. A framework was created to operationalize Ghana’s opportunities, and to assess their current position in their fight on the resource curse. The discovery of oil leads to negative changes in a country’s polity and society, like corruption and social conflict. These factors could lead to worsened economic management and performance, eventually resulting in the country falling for the resource curse. Through transparency, government and civil society can act to counter this effect.
Transparency seems to be sufficiently institutionalised in Ghana for civil society and government to actively prevent the resource curse. The society and polity seem stable enough to withstand the first negative effects of the discovery of oil, and ensure good economic management and performance on the short term. Though legislation seems in place, it is not clear what will be done with the money in the long term. Balanced decision making, based on transparency and input by civil society and government combined, in the short and long term should make economic development successful. Civil society and government should keep the resource curse in mind in future decisions to avoid a delayed resource curse effect.
Though a lot of research has been done on the different mechanisms, no attempt had yet been made on a comprehensive source for a country on how to effectively fight the resource curse. This thesis can be viewed as a first draft for a comprehensive framework on the subject of the resource curse. As history has shown, contexts change with time and location, and there will possibly never be a simple guide for countering the curse. But the abundance of literature shows tendencies
towards certain aspects and factors that are of importance in any context. This thesis explores the possibilities of creating a framework within which governments and civil societies can act to counter the resource curse, in any place at any time. No claims are made on the absoluteness of this framework, but academics should see this as a first step in exploring the framework surrounding the effects of oil discovery.
The road lies open for Ghana to become the new Norway instead of the new Nigeria. There is a possibility to turn the resource curse around, into a resource blessing. The beginning of the road has been paved neatly. A democratic polity is institutionalized, and civil society has become more active than ever before. The need for transparency has been on the agenda since before the oil discovery because of the mining sector, which gave Ghana a head start. Economic performance has not yet shown any negative effects from the discovery of oil. The resource curse has not yet taken a grip on Ghana’s political, economic and social situation. Only time will tell if they succeed in upholding this success and completing the fight on the resource curse, so Ghana can hold its position of the best kid in class.
