‘Ghana has best rules for use of natural resource funds’
Ghana's laws and mechanisms which regulate the use of its natural resource funds are the best in Africa, the Revenue Watch Institute (RWI) has concluded.
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According to the RWI, a global watchdog based in New York, Ghana had, among many other things, strong deposit and withdrawal rules that helped to prevent the mismanagement of oil revenues.
The findings of the institute were captured in its 2013 report launched in Accra yesterday by Mr Andrew Bauer, an economic analyst with the RWI.
Ghana’s natural resource funds, namely, the Ghana Stabilisation Fund and the Ghana Heritage Fund, have market values of $54.9 million and $14.4 million, respectively.
Key findings
It said in Ghana’s regulatory framework, the objectives of the funds were clear, just as rules on how much could be withdrawn in any given year, which revenues must be deposited and when, use of resource revenues as collateral, investment risk limitations, penalties for misconduct by fund managers and staff and the role of government agencies in fund management.
According to the report, dated January 2013, there was clarity on public disclosure of internal audit results, formalised oversight mechanisms, public disclosure of regulatory compiled fund reports and publication of specific investments.
It, however, observed that there were “gaps” on issues such as ethical and conflict of interest standards for management and staff, detailed responsibilities of fund managers and staff and public disclosure of independent external audits.
The RWI gave Ghana high marks on fund objectives, fund deposit rules, fund withdrawal rules, flow of funds, investment allocation, actual investments and oversight mechanisms.
PIAC’s comments
The Chairman of the Public Interest and Accountability Committee (PIAC), the multi-stakeholder body which promotes compliance with Ghana’s oil revenue management laws, Major Ablorh Quarcoo, acknowledged the fact that Ghana had good laws but said the country needed to ensure that those laws were implemented.
He said emphasis needed to be laid on making good investments with the funds and ensuring that they benefitted all Ghanaians.
Fund Highlights
Ghana’s petroleum revenue is first held in an intermediary Petroleum Holding Fund, from where it is then allocated to the Ghana National Petroleum Corporation (GNPC), the Annual Budget Funding Amount and Ghana’s two sovereign wealth funds which are collectively known as the Ghana Petroleum Funds (GPFs).
The GPFs are the Ghana Stabilisation Fund and the Ghana Heritage Fund.
Both GPFs are held separately from Ghana’s Consolidated Fund, which is funded by the Annual Budget Funding Amount and serves as the source of the national budget.
Fund Inception and objectives
The Ghana Petroleum Holding Fund, the Ghana Heritage Fund and the Ghana Stabilisation Fund were established under the Petroleum Revenue Management Act of 2011.
The act anticipates that when Ghana’s natural resources are eventually depleted, the two sovereign wealth funds will cease to exist and all remaining assets will transfer to a new fund, the Ghana Petroleum Wealth Fund.
The aim of the Ghana Stabilisation Fund is to mitigate the negative effects of oil revenue volatility on the national budget and sustain public expenditure capacity in the unanticipated event of revenue shortfall.
With regard to the Ghana Heritage Fund, its aim is to save oil revenues for future generations of Ghanaians.
The Petroleum Revenue Management Act ensures that together the funds “provide for the collection, allocation and management of petroleum revenue in a responsible, transparent, accountable and sustainable manner for the benefit of the citizens of Ghana, in accordance with Article 36 of the Constitution”.
Fund deposit and withdrawal rules
All petroleum revenue is initially collected and deposited in an intermediary Petroleum Holding Fund at the Bank of Ghana.
It is made up of royalties, profit oil, corporate income tax, participating interest, transfers from the GNPC to the government, investment income and surface rentals.
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Withdrawal of the Ghana Heritage Fund can only be made once oil reserves are depleted and both petroleum funds assets are merged into the Ghana Petroleum Wealth Fund.
Regarding the Ghana Stabilisation Fund, withdrawals may support the budget if quarterly oil revenues fail to adequately cover 25 per cent of the Annual Budget Funding Amount.