[BLOG-LIKE POSTING] Oh no, Ghana has oil
Aug. 30th, 2007 07:40 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
rfmcdonaldThe long and hitherto unsuccesful history of oil companies' prospecting for oil and natural gas came to an end earlier this month with the announcement that six hundred thousand million barrels of oil have been found off the Ghanaian coastline. The Ghanaians are worried.
Ethan Zuckerman earlier provided an overview of the reasons for this fear. Briefly put, countries which earn large revenues from exports of high-value commodities like oil tend to see economic shifts away from more conventional sectors of an economy like manufacturing, as labour and capital shifts away from less lucrative sectors while national currencies gain enough value on international markets to pay for imports. When prices for these commodities drop, the resulting effect on national economies--commonly called the Dutch disease--can be devastating. High-value commodity exports, by minimizing the need for investment in human capital, can also sustain authoritarian and dysfunctional polities thankful to bypass the need for a productive and educated middle class--Saudi Arabia is perhaps a leading example of this kind of country. Just as important as the economic and political effects of oil are the geopolitical impacts, as rising world consumption drives the development and further expansion of oil and natural gas exploration beyond traditional areas, into regions of the world--like sub-Saharan Africa--which are already quite fragile. In his recent book Untapped, excerpted extensively at Slate, John Ghazvinian explores how oil and natural gas exports tended to discourage broader development even in the most favoured states: Hydrocarbon fuel riches in Francophone Gabon have fatally undermined the rest of the economy, Hispanophone Equatorial Guinea's post-genocidal ruling clique is using the new revenues to enrich itself, and Lusophone São Tomé e Principe is reduced to hoping that its rulers are nice enough to avoid these problems, really, and the 2003 coup attempt there was meaningless. As for Nigeria's mess, well. Zuckerman is fairly hopeful that Ghana can escape the worst effects of the oil boom because of its relatively good governance.
Whether Zuckerman's hope is justified is, alas, something we'll have to wait to see.
[A]s the euphoria dies down, people are debating whether oil is really the economic injection their country needs. After all, the other countries along the Gulf of Guinea that have discovered significant deposits - from Angola to Equatorial Guinea and Congo-Brazzaville - have sunk rather than flown. And Ghanaians need only travel a few hundred miles east to discover why oil is considered a curse in Africa rather than a godsend.
"Nigeria has oil in abundance, yet the local people have nothing," said George Moore, a 29-year-old restaurant worker in Axim, a fishing village near Cape Three Point. "Is that what is going to happen here?"
Others say Ghana's economy, which relies mainly on gold, timber, cocoa and a budding IT sector, is already doing well without the easy money that oil will provide. Since the near collapse of the economy in the 1980s, economic growth in Ghana has averaged about 5%, climbing to 6% in each of the past three years.
Poverty levels have dropped from 52% in 1990 to 29% today, according to the World Bank, making Ghana one of the few African countries on track for the main Millennium Development Goal of halving poverty by 2015. Compare that to Gabon, which has been pumping hundreds of thousands of barrels of oil a day for more than 30 years and where two-thirds of the population still lives on less than a dollar a day.
"Our country works, but the idea of us producing oil still scares me," said Kofi Bentil, a business lecturer at Ashesi University in Accra. "It will totally change the structure of the economy. It could push us into overdrive, but it could also lead us to self-destruct."
Ethan Zuckerman earlier provided an overview of the reasons for this fear. Briefly put, countries which earn large revenues from exports of high-value commodities like oil tend to see economic shifts away from more conventional sectors of an economy like manufacturing, as labour and capital shifts away from less lucrative sectors while national currencies gain enough value on international markets to pay for imports. When prices for these commodities drop, the resulting effect on national economies--commonly called the Dutch disease--can be devastating. High-value commodity exports, by minimizing the need for investment in human capital, can also sustain authoritarian and dysfunctional polities thankful to bypass the need for a productive and educated middle class--Saudi Arabia is perhaps a leading example of this kind of country. Just as important as the economic and political effects of oil are the geopolitical impacts, as rising world consumption drives the development and further expansion of oil and natural gas exploration beyond traditional areas, into regions of the world--like sub-Saharan Africa--which are already quite fragile. In his recent book Untapped, excerpted extensively at Slate, John Ghazvinian explores how oil and natural gas exports tended to discourage broader development even in the most favoured states: Hydrocarbon fuel riches in Francophone Gabon have fatally undermined the rest of the economy, Hispanophone Equatorial Guinea's post-genocidal ruling clique is using the new revenues to enrich itself, and Lusophone São Tomé e Principe is reduced to hoping that its rulers are nice enough to avoid these problems, really, and the 2003 coup attempt there was meaningless. As for Nigeria's mess, well. Zuckerman is fairly hopeful that Ghana can escape the worst effects of the oil boom because of its relatively good governance.
So will the same thing happen in Ghana? There’s reasons to think the Ghanaian government will be able to avoid some of the traps other nations have fallen into. Ghana is in excellent economic shape in comparison to its neighbors. It’s one of the very few nations in West Africa on pace to meet its millenium development goals and to halve poverty by 2015 - the percentage of Ghanaians living in poverty has dropped from 52% in 1992 to 35% by 2003. Economic growth has averaged 4.5% a year since 1983, and has been at or above 6% the last three years. This growth has had some connection to natural resources and commidities, including gold and cocoa, but has also included growth in tourism and service outsourcing. A stable, investment-friendly government has encouraged many diaspora Ghanaians to return home and start businesses. Friends from around the continent report a sense of excitement in visiting Accra and Kumasi, and a sense that the country is going through an economic revolution.
Whether Zuckerman's hope is justified is, alas, something we'll have to wait to see.
