Some years back, I used to watch Nollywood movies. As far back as I can remember, I watched this thrilling movie which told a great life lesson.
This lesson was captured in a fateful encounter between a rich man and his friend who sadly struggled to make ends meet. The poor man grabbed every opportunity to constantly ask for money from his colleague but the rich man never turned his back on his friend. Several months had passed and now, the poor man's attitude became a usual phenomenon. One day, the long silence was broken. The poor man went on his usual mission at his friend's house. The rich man pointed out to his friend "I will not fish for you any longer but I will teach you how to fish". Eventually, the poor man learned the skill of fishing and that was the end of his nagging attitude as well as his self -motivated poverty.
Last Sunday, Vice President Dr. Bawumia revealed, speaking at the Black Star Square to mark the national celebration of Eid-ul-Adha that, Saudi Arabia king, Salman Bin Abdulaziz Al Saud has promised to finance the construction of a medical facility in the Northern Region as well as the construction of 42 Senior High schools in the country.
However, the Vice president did not spell out the nitty-gritty of King Abdulaziz's pledge. The truth about the pledge which could be a barter agreement, a loan, a grant or any kind of economic move we believe will be best decided by time. Formerly, Saudi Arabia's economy was in complete doldrums.
Their eventual discovery of oil marked a new, refreshing period leading to a remarkable rise in their socio-economic standards. Recent statistics have shown that Saudi Arabia has US$ 697 billion as financial reserves in their Sovereign Wealth Fund. The country's rapid economic progress combined with its robust social mechanisms has seen tremendous development across various sectors of its economy. Saudi Arabia after its economic sprout has assisted several low and middle-income level economies over the years. In 2010, Ghana started extracting oil in commercial quantities yet the country struggles to make the most out of the same opportunity Saudi Arabia had some years back.
Since Ghana started producing oil in commercial quantities in 2010, the country has only gained a paltry sum of $4.7 billion while foreign companies have gained over $16billion representing 81% of the profit from our oil production according to data by PIAC. This low amount of revenue gained is largely due to Ghana’s old, colonial mode of contracting with foreign investors. We have signed production-sharing agreements that only give us a pittance while huge returns go to the foreign investor(s).
This is not how Saudi Arabia does it. Saudi Arabia signs service contract agreements. According to data from energy industry consultant, Rystad Energy, averagely, it costs Saudi Arabia less than $9 to produce a barrel of oil. This includes exploration and other costs making it the cheapest in the world in terms of production cost. Some OPEC countries like Iran and Iraq produce at $10 per barrel as well. Russia and Norway also sign service agreements with contracting companies in lieu of production sharing agreements. With service agreement, the host state pays the investor a certain amount (about $10 per barrel) and keeps the super profit called rents. All nations that are gaining huge revenue from their oil resource to support their development are bent on signing service agreements.
So today, if Saudi Arabia wants to fish for us, they can do it because they have the right measures in place to cater for their oil resources whereas Ghana has taken a wrong turn. In 1960, Ghana's per capita income was US$ 179 and South Korea’s was US$82. In other words, Ghana was twice as rich as South Korea. However, Ghana’s public debt (exchange rate inclusive) as at June 2019 had ballooned to a whopping GHS 204 billion and her per capita income stood about $1,500 while South Korea’s per capita income is about US$ 32,000. Implicitly, South Korea is twenty times richer than Ghana. What a reversal of fortune! Certainly, something might have gone wrong.
The old colonial method of providing foreign aid while extracting our natural resources with the rent-seeking contract is never going to develop Ghana. The past 60 years have seen enough of these different “schemes” by some colonial companies masquerading as “foreign investors”. They cannily exploit our creaky and incoherent set of rules to enrich themselves while Ghanaians remain poor even in the midst of plenty. God gave us much wealth. Confessing to our shame, the country is rich underneath yet poor above.
Dr.Bawumia and President Akufo-Addo led government had a brighter opportunity to stop writing colonial contracts with the Aker Energy oil discovery this year but they, like all their predecessors, failed Ghanaians. Today, we have given barrels of oil worth over $65 billion (which is higher than our GDP) to a foreign consortium to develop her country to the detriment of ours. With $65billion, we could have built 420 SHS and 10 medical facilities in northern region but we gave it away and chose, yet again, to beg countries that have managed theirs well to support our development. When will we be bold and take our destinies into our own hands?
To end with, I want to plead with Dr. Bawumia and President Akufo-Addo led the government to do the following;
- Take steps to repeal the Petroleum Exploration and Production Act (2016) Act 919. This law was outmoded at birth and has been declared as "garbage" by Energy Law Professors from Harvard and Texas Universities.
- Parliament should pass a law that reflects the progressive “service agreements” and not “production sharing agreement” like Act 919.
- Cancel the colonial contracts with these foreign investors which run up to 2040 and beyond and sign service contract agreements.