Ghana’s cursed growth

The oil boom has came with a number of evils–and few jobs

by Paul Carlucci

Photograph by Paul Carlucci

The West may be paddling an ocean of debt and disorder–naught but austerity and tatty lifestyle reductions–but Africa is booming, especially Ghana, one of the world’s fastest growing economies in 2011.

In this West African nation, it’s the era of oil. Tapped just over a year ago in the Gulf of Guinea, the Jubilee Oil Field contributed seven per cent of the country’s 14.6 per cent growth last year. A reported 23 million barrels were lifted out of the field in 2011 by Ireland’s Tullow Oil and other stakeholders. The Ghana National Petroleum Corporation, a 13 per cent shareholder, lifted $344 million-worth.

But discoveries of vast natural reserves are notoriously a tricky thing to manage. There’s the text-book case of the Netherlands–which economists dubbed the Dutch Disease–, where natural gas reserves found in the 1960s lead to an appreciation of the local currency that eventually chocked a number of domestic exporters. And then, of course, there’s Nigeria, where billions in oil wealth did little to relieve the wretched poverty of the Niger Delta region.

Ghana is having its own share of troubles. Critics say millions have already been lost in unpaid corporate taxes and a skewed royalty system. Meanwhile, the oil-propelled growth has failed to create jobs or spur development in a country that, despite its recent elevation to lower-middle income status, still struggles with grinding poverty in its urban, rural, southern and northern regions.

“The growth associated with oil development is false-growth because the investment does not have direct bearing on the economy,” says Mohammed Amin Adam, an energy economist and the national oil coordinator of Publish What You Pay Ghana, an advocacy group. “Development hasn’t kept pace with growth,” he adds. Despite the GDP numbers, “more and more people are coming under the poverty line.”

There are three issues the government needs to address if it wants to turn Ghana’s oil sector into a ground-level growth machine, says Adam. The first revolves around supply side economics. Ghana is largely an import-based economy. It ships away its raw materials–gold, timber, cocoa–for production elsewhere, then buys back finished products. The influx of oil revenue, says Adam, is playing up this dynamic, swelling up demand that can’t be met domestically. If the supply side can’t match the rise in demand from the inflow of oil revenue, the result will be inflation, he says.

And the oil money is feeding another beast: corruption. Unquestionably, Ghana is not new to the problem. An anti-corruption NGO recently estimated that the country loses $4 billion a year to pernicious seepage, and Transparency International ranked it 69th out of 183 countries in its 2011 Global Corruption Perception Index. But civil society watchdogs worry that the oil bonanza will ratchet up greed in 2012, an election year, and beyond.

Bribes and graft, in turn, will “increase the cost of investment,” predicts Adam. He’s talking about general investment, including in non-oil sectors, where the potential lies for Ghana to create the jobs it needs. The oil boom, in fact, has been largely jobless. Unemployment was at 11 per cent in 2000, according to the latest census, but the government plainly admits it doesn’t know how many people are out of a job these days. One thing is for sure, though, pouring more of the oil money into the agricultural sector would help put people to work, says Adam. Agriculture made up about 16 per cent of  Ghana’s GDP in 2011, and that’s where a big portion of the country’s permanent jobs are. “Depending on how we spend the money in the non-oil sector that have higher growth potential, higher employment potential, like agriculture, then that could help the country,” muses Adam. A planned Heritage Fund is meant to address these sort of ideas about how to use the oil money. Alas, it only accounts for only nine per cent of that revenue.




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Ghana’s cursed growth

  1. Not unlike us.  We were just further along the road of economic progress, when the oil  boom came in.

    1947…after the war, and industrialization.

  2. You Whites should display better pictures of Africa. Why do you always enjoy showing only bad things about others? Devils.

    • It is a story about the poverty in the country, what should be shown a happy kid in a department store with mommy buying him all that he wants despite being p!ss poor???
      And really us whites…. N

  3. Corruption is invidious, almost impossible to develop civil society when it is corrupt. People don’t trust one another and society does not coalesce. Have no idea how you eliminate it, tho. 

    I spent a few weeks in Botswana and it makes me wonder why some countries succeed and prosper and why some don’t. 

    Adam Smith ~ Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.

    PJ O’Rourke ~ Politics should be limited in scope to ware, protection of property, and the occasional precautionary beheading of a member of the ruling class.

  4. Hypocrites u whites. u are not cleaaaaaaaaaaan. Does it mean u never visited any beautiful place in Ghana. Even within ur country there are poor and dirty vilages.

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