Oil-rich African countries must diversify economies
A Deputy Minister of Finance, Mr Cassiel Ato Baah Forson, has urged oil-rich African countries to put in place efficient mechanisms to ensure effective management of oil revenues.
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He said they should diversify and adhere to the prudent management of domestic revenue through adequate savings and guarded expenditure to develop their economies.
“Countries cannot rely on petroleum revenue alone. There are other extractive resources and I think that is the way to go. These resources will not be there forever so countries need to avoid complacency. It is not sustainable to wholly put all our hope in the oil revenue,” he said.
Mr Forson was speaking at the opening session of a two-day policy dialogue on the management of oil revenue under the auspices of Collaborative Africa Budget Reform Initiative CABRI) and the Ministry of Finance in Accra last Tuesday.
The forum brought together high-level government officials from 15 African countries, including South Africa, Liberia, Nigeria, Zambia, development partners and industry experts.
The CABRI session
CABRI is a membership-based organisation that operates with finance and planning ministries in Africa in the areas of budget policy systems and accountability, institutional capabilities that aid budget credibility and public debt management.
The sessional objective of the two-day event was to discuss policy issues relating to challenges that oil-rich African countries face in the development of their extractive sectors.
The participants would also look at how to effectively establish a linkage between the extractive sector and the rest of the economy.
Diversification
Mr Ato Forson observed that there was the need for countries endowed with oil resources to earmark funds for stabilising the economy.
“Ghana has petroleum resources, as well as mineral resources. It is, therefore, important to diversify our resources to look at other extractive areas. Gold, for instance, accounts for 90 per cent of Ghana’s mineral resources. But, it is not sustainable as a country to rely on only these natural endowments,” he said.
He said it was important for countries to earmark funds to invest in key sectors of the economy such as education, health and agriculture and to meet emergencies.
“In Ghana, we set aside 25 per cent of oil revenue for infrastructural development under the Ghana Investment Infrastructure Fund (GIIF). It is managed by the private sector with little government control. The Petroleum Revenue Management (PRM) Act empowers the Ministry of Finance to save and to ensure that during bad times we can rely on accrued revenue,” he said.
He said the country had also established the Sinking Fund with petroleum revenue that would be used for the repayment of debts. He called on other countries to learn from Ghana.
Challenges to African economies
The Executive Secretary of the CABRI Secretariat, Mr Neil Cole, noted that most oil-rich African countries did not maximise the gains in the oil revenue because they failed to manage extractive resources in a sustainable manner.
He observed that poor public spending and planning of development projects led to volatility in government expenditure.
“Although the revenues from the extractive sectors were expected to deliver wealth and reduce poverty, these expectations have not been met by some African countries. The right measures must be put in place to change the trend,” he said.