Is the NDC fleecing the Petroleum Stabilisation Fund?

Is Ghana's ruling National Democratic Congress (NDC) party cheating Ghanaians of the Petroleum Stabilisation Fund by their clever-sounding scheme? How did the 'fair weather chaps' chisel money out of the Fund they are not allowed  to touch? I will attempt to expose the ploy these guys put in charge of managing the revenue accruing from the Oil sector are using to fleece Ghanaians just a year into commercial oil production in Ghana. 

You must have heard the news of Ghana losing some GH¢583 million Oil revenue in 2011. So that is late, it is no longer news. What perhaps you might not know is the scheme designed by the ruling NDC party to rip Ghanaians off of monies intended for other purposes. Already, it is an established fact the unprecedented borrowing-happy and non-accountability nature of the government is making the country debt ratio unsustainable. 

The Public Interest and Accountability Committee or PIAC, an independent monitoring body of the Ghanaian oil sector, in its maiden annual report for 2011 on the management of petroleum revenue disclosed that Ghana failed to achieve the targeted oil revenue of GH¢1.250 billion for 2011 as the nation has only raked in GH¢666 million from the commodity. The PIAC has the responsibility to monitor and evaluate compliance with the Act by government and other relevant institutions in the management and use of petroleum revenues and investments. The report indicated this amount represented a shortfall of GH¢583 million, which the Jubilee partners have attributed to the inability of the Jubilee field to produce the estimated 120 barrels of oil daily. It further explained that out of the total receipt, an amount of  GH¢315.390 million, representing 47 percent was transferred to the Ghana National Petroleum Corporation while GH¢250.432 million went into budget spending. The devil, the saying goes is in  the details so the shock came when it was revealed that 'the amount allocated to the annual budget, stabilization fund and heritage fund was less than the targets of GH¢395,980,000.7, GH¢111,915,435 and GH¢613,195,95. 

According to the legislation covering the spending of the oil revenue, the share accruing to Ghana is to be divided into three according to a specified formula. These are the Budget Support, stabilization Fund and the Heritage Fund. The budget support portion as the name suggests is an allocation made directly to the budget for government programmes and spending during the year in question. The Ghana Stabilization Fund is to cushion the impact on or sustain public expenditure capacity during periods of unanticipated petroleum revenue shortfalls. In other words, it is meant to insulate the domestic economy from shocks due to shortfalls in revenue accruing. The Ghana Heritage Fund is to provide an endowment to support development for future generations when petroleum reserves have been depleted. 

The first worry is of course very evident as it can be seen directly from the law and the table below. The government allocated 21% of the excess revenues to the Ghana Heritage Fund instead of not less than 30% and rather strangely allocated 79% to the Ghana Stabilization Fund. Therefore the Ghana Heritage Fund was under-declared by GH¢9 million whilst the Ghana Stabilization Fund was over-declared by the same amount.

 The ruling NDC government contravened the law on the Ghana Petroleum Funds when it allocated an amount less than that required. This is a deviation from the requirement of Act 815, Section 23(1)b which states that “a minimum of thirty percent of the excess revenue determined in subsection (1) (a) shall be transferred into the Ghana Heritage Fund and the balance shall be transferred into the Ghana Stabilisation Fund each quarter”. This inconsistency with Act 815 is no anomaly as the PIAC sought to portray. I will explain subsequently.

What the PIAC did not tell Ghanaians is that the law provides tax holidays for the companies in the sector to allow them to recoup the investment. Consequently, Ghana is not expected to tax them for at least the first five years of production. Ghana’s law permits the oil companies to recover 20 percent of what was invested, and according to the Jubilee partners they had invested a total amount of $4 billion which could be recouped over the next four to five years before they start paying corporate taxes. This fact is fully known to the Ministry of Finance and yet it deliberately included expected taxes in its estimates of revenues for the period in review. Why was this done? It is very simple to see through the trick at play here. The inclusion of taxes artificially creates an over expectation scenario which then gives the government the opportunity to use the money in the Stabilization Fund. This makes perfect sense as the law allows that when there is shortfall in expectation of government revenue from the oil production, the Ghana Stabilization Fund is to be used ”to cushion the impact on or sustain public expenditure capacity during periods of unanticipated petroleum revenue shortfalls”. Therefore, one sensible way of arriving at "periods of unanticipated petroleum revenue shortfalls" without the role of market forces is to artificially cause it. And to make matters worse, the NDC deliberately put more than the expected monies in the stabilization fund to achieve even maximum effect. History is on our side. Please remember that when the NDC legislated the GETFUND act, it collected huge amounts in VAT revenue prior to the 2000 elections, yet set up no GETFUND hence left no money. Instead the NDC led by the same crop of men namely John Evans Atta Mills (head of Economic Management Team), Kwabena Duffour (Central Bank Governor) and Amissah-Arthur (Junior Finance Minister) left Ghana highly indebted poor country (HIPC). 

All indices point to the fact that the health of the economy is not as rosy as the government communication team is attempting to paint the picture. The arrears to all sectors of the economy including the non-payment of statutory payments like the Common Fund from the last quarter of 2011 to date should vividly and forcifully convene the real state of the economy of Ghana. The inconsistency registered between inflation figures on one hand, and exchange rate, interest rates and cost of living on the other hand must tell all of us that rough times lie ahead and the NDC will cook any imaginable scheme to fleece us to keep the sinking government afloat at least till the general elections on December 7, 2012. All Ghanaians, we must shine our eyes else present danger to clear in 2013. My skepticism is borne out of reality and please brace yourselves up for a bump ride ahead, the Dutch Disease is almost here. May be Obama and his folks within the G-8 have not scrutinised the Ghanaian economy sector by sector yet hence erroneously talking about food security rather than potential famine this year.