Ghana holds large reserves of a variety of minerals, and its extractives sector has been dominated for centuries by mining. Gold, diamonds, bauxite, manganese and salt are commercially exploited, along with substantial resources of iron ore. Gold is the most important mineral mined, accounting for 90% of mining sector revenue, 40% of total exports, and up to 40% of revenue in some mining area district assemblies.

It now stands on the brink of becoming an oil exporting country, following the historic 2007 offshore discovery now known as the Jubilee Field. Estimates of total oil reserves range from 800 million to 1.8 billion barrels. Commercial extraction began in December 2010, and is expected to generate over US $1 billion per year in export revenue over the next 20 years.¹ Several companies are licensed for further exploration, and new oil discoveries continue to emerge. As a result, servicing outfits, oil companies and workers have flooded Ghana’s coastline.

Annual real GDP growth rates have ranged between 4 and 5.4% over the last decade. GDP grew by 7.3% in 2008, and despite the global downturn, the economy has remained largely resilient, growing around 4% in 2009. Growth is forecasted to exceed 5% in 2010, and with the start of oil exports, may continue its upward trend.

Despite the productivity of its gold mining, Ghana’s mineral industry stagnated until the comprehensive Economic Recovery Program (ERP) of new macroeconomic and structural policies was instituted in 1983. Supported further by the Minerals and Mining Law of 1986, mining has since become an important sector of the Ghanaian economy, responsible for 6.2% of GDP and 14% of government revenue in 2007.²

Inflation rates have fluctuated from over 40% in 2000 to 10.5% by 2007, with a jump back to 20% in 2009 after a currency depreciation. Inflation stood at 9.8% as of November 2010. Meanwhile, increasing government spending pushed fiscal deficits up to 14.5% in 2008 and debt stock to above 50% of GDP. In response, the government of John Atta Mills introduced several austerity measures in 2009, including an increase in mining royalties from 3 to 5% shortly thereafter in March 2010. As a result, the fiscal deficit has fallen to single digits, and the growth of the debt stock has been slowed.

The country still faces major challenges in the distribution of resource revenues for the public good. Ghana ranks 130th on the UN Human Development Index for 2010, and 53.6% of its population lives on less than $2 a day (World Bank, 2006). In recent years the country has slipped on numerous critical Millennium Development Goals (MDG) targets, such as halving poverty, reducing child mortality, and ensuring gender parity in school enrollment and completion.

The relative strength of Ghana’s institutions compared to other resource-rich countries and the prospects for avoiding the usual pitfalls of oil dependency have generated significant enthusiasm from international partners. The World Bank, as one example, has promised $350 million in funding for natural resource management in 2010.

Revenue Transparency

In 2003, Ghana signed on to the Extractive Industry Transparency Initiative (EITI), a positive indicator of the country’s commitment to growth through transparent development of its resource sectors. While initially applied only to the mining sector, the Mills government has stated an interest in extending the EITI process to the oil sector and preparations are underway for this expansion. Although Ghana missed the initial March 2010 validation deadline, the EITI Board granted an extension until September. With this extended deadline met, the EITI Board deemed Ghana an EITI Compliant country at its October meeting in Dar es Salaam, Tanzania.

The first audited EITI report, covering Ghana's mining revenue from January to June 2004, was published in February 2007 and included subnational reporting from district assemblies. Although no discrepancies were identified between company payments and government receipts, the report raised serious concerns over royalty computations, the calculation and opacity of royalty disbursements at the subnational level, and the opacity of contract details, investment agreements and royalty usage by district assemblies and traditional authorities.

In 2008, two more EITI reports were published, covering July-December 2004 and January-December 2005 respectively. These reports indicated some progress, but the roughly three-year lapses between their publication and the data limited the reports' relevance, and reporting slowed after the first three reports.

The report published in September 2010 covers data from 2006, 2007 and 2008. This report reflected some improvements in the sector, for example in the tracking of disbursements to the subnational level. Other problems appear to have persisted, however, especially regarding the computation of appropriate royalties and other payments. Looking ahead, it will be important for Ghana to try to publish reports in a more timely and regular fashion in order to further transparency in the sector.

The Ghanaian government is considering the introduction of a fiscal responsibility law to expand the existing Financial Administration Act of 2003. This would anchor fiscal expectations by crafting long-term strategic plans for resource usage regardless of short-term political changes.

Expenditure Transparency

Ghanaian authorities are making progress in improving expenditure transparency, and the country has introduced targeted legislation in recent years designed to ensure accountability, transparency and efficiency in public resource management, including:

• The Financial Management Act of 2003, which regulates the public sector to ensure transparent and effective management of state revenues and expenditures
• The Public Procurement Act of 2003, which aims to foster competition, efficiency, transparency and accountability in procurements

Further efforts in expenditure transparency include the 2007 launch of Public Expenditure Tracking Surveys (PETS) in the education and health sectors, and Ghana’s inclusion of a requirement in its EITI framework that district, municipal and metropolitan assemblies report royalty receipts and how they are used. Ghana's Publish What You Pay (PWYP) coalition is supporting an ongoing community capacity-building exercise to track these disbursements.

An evaluation conducted by Public Financial Management (PFM) in 2006 under the auspices of the World Bank and the Department for International Development (DFID) concluded that, "the PFM system in Ghana is based upon a solid legal and regulatory framework." Nevertheless, the PFM report also identified critical weaknesses in budget documentation and in the transparency of inter-governmental fiscal relations. Further, it illustrated the need for effective internal audit systems in Ghana. Civic engagement on the budget process has increased, and Ghana has climbed higher on the Open Budget Survey in recent years, moving from 49% in 2008 to 54% as of 2010. However, room for improvement with respect to public involvement in monitoring and auditing processes remains.

Contract Transparency

As in many countries, secrecy surrounding mining and oil contracts is an issue in Ghana. Before Ghana endorsed the EITI in 2003, all discussion of contract transparency was branded as anti-business. The first EITI report, however, recommended that all of Ghana's mining contracts, including investment agreements, be made public.

Nevertheless, obstacles to transparency remain. For one, the Ghana National Petroleum Corporation is not committed to contract disclosure. It has offered a model contract and related laws, available in CD-ROM format, but this presents a technological barrier and does not address the fundamental problem that actual contracts remain unavailable for comparison. The model contract, drafted during the 1980s, also faces scrutiny over whether it adequately addresses contemporary market realities.

In other challenges to contract transparency, the previous government of John Kufour set up a separate, parallel inter-ministerial committee for oil, which reported directly to the president's office and was not related to—or accountable to—the EITI management committee; and the current contracts for Tullow Oil, US Kosmos Energy and Anadarko were awarded through direct negotiation instead of an open competitive bidding process.

A key challenge for the government is to reconcile the gains and commitments made through the EITI process for the traditional mineral industries with the euphoria surrounding the Jubilee Field discovery. To this end, the government submitted two bills to Parliament in 2010 with major implications for oil-sector governance. The first addresses governance of petroleum exploration and production, including the relationship between the state and international oil companies. The second would establish two transparently operated oil funds to guard Ghana against economic volatility and provide a heritage for future generations.

Freedom of Information

There is a strong call for Ghana to enact a Freedom of Information Law and affirm the public's right to information as a critical means to bolster and promote transparency. Continuing public and media discourse is taking place on this issue, and discussion regarding the EI sector has increased since the launch of the EITI and the recent oil discoveries. The government has expressed its intention to initiate a FOIA bill, but without continued pressure, there is no evidence of that happening any time soon.

¹ www.imf.org/external/pubs/ft/scr/2009/cr09256.pdf, p. 10.
² minerals.usgs.gov/minerals/pubs/country/2008/myb3-2008-gh.pdf