Carlos da Costa, PhD Mining Engineering // Feb 21, 2015
The mining industry of Ghana in 2014 accounts for 9.1% of the country’s Gross Domestic Product (GDP), in current market prices, and gold made up 36% of total exports in 2013. Ghana is Africa’s 2nd largest gold producer and the eighth-biggest global producer, producing 107.9 metric tons of gold in 2013. Ghana became a petroleum producing country on November 28, 2010. The energy sector accounted for 6% of the GDP % in 2014. Despite the mining and energy industries, combined, in 2014 accounted for 15.1% of Ghana’s GDP poverty persists throughout much of the country.
Improving transparency and accountability to support economic and political development in a member country is the focus of the EITI. Ghana was one of countries which voluntarily joined EITI in 2003. It did so in respect of its mineral extractive sector only and extended its reporting requirements to the subnational level.
The discovery of oil in Ghana in 2007 only increases the relevance of extractive industries for Ghana’s economy. For all of its riches, Ghana still counts as a poor country with a Human Development Index (HDI) that barely reaches the “Medium Human Development” category. Its government apparently faces serious challenges to unlock its potential for self-sustained economic and social development by utilizing revenues from its growing extractive industries sector.
Since becoming EITI compliant in 2010, Ghana has published EITI reports, from 2004-2013, covering ten fiscal years. Among the many accomplishments of Ghana’s EITI is its leadership in rolling out a detailed subnational EITI component. Ghana has been tracking these subnational payments back to 2003. By implementing the EITI at the subnational level, the Ghana EITI (GHEITI) deliberately embeds the EITI practices in its national and subnational systems, thereby making the EITI relevant on all levels of government, and particularly to those who are affected most.
The Natural Resource Governance Institute and the Centre for Social Impact Studies have collaborated to analyze Ghana’s EITI reporting on subnational revenue disbursement, collection and spending. Their findings highlighted the need for timely sharing of resource revenues with subnational jurisdictions, and the need for national and local governments to have an economic vision beyond the life cycle of a mine.
Ghana’s first audited EITI report, covering mining revenue from January to June 2004, was published in September 2007 and included subnational reporting from district assemblies. Although no significant discrepancies were identified between company payments and government receipts, the report raised serious concerns over royalty computations and the transparency of subnational disbursements, as well as issues with contract transparency and the uses of royalties by authorities. Further reports published in 2008 and 2010 covered the second half of 2004 and all of 2005 through 2008. The reports reflected some improvements in the sector, for example in the tracking of disbursements to the subnational level, although the three-year time lapses diminished the relevance of the reports.
The 2010-2011 EITI reports were published in 2013. The 2011 EITI report confirmed that subnational (local and regional) governments continue to receive significant revenues in form of royalties and taxes from the mining sector. Roughly 40% of the budget of local governments comes from mining. These reports also highlighted a number of issues that required attention in order for Ghana to meet the requirements of the EITI Standard in its 2012 report. This included a more comprehensive coverage of subnational payment arrangements. The 2012-2013 EITI Ghana Report now shows the contribution of the extractives sector to the local economy, exploring how much revenue has been generated and its application; however, further effort is required to achieve greater subnational payments transparency.
In 2013 at a community fora organized by GHEITI it was agreed that at the subnational level there is a greater need for transparency in the extractive sector between both district assembly and community members regarding the level of contribution they make towards local development programmes. “We now know we need to keep an eye on how the District Assembly uses the money that comes in, especially the royalties”, said a community member. A traditional ruler said “EITI shone light on the hidden points” of the revenue receipts and allocation process (GHEITI 2013).
Little has been said regarding the state of Ghana’s oil revenue distribution at the local level. However, the mining sector experiences illustrate that it is not new to issues that border on the distribution of extractive industry revenues across the levels of government. It is worth stating that Ghana does so at her own risk if revenue assignments especially to the subnational entities are treated as prosaic.
The experience of Ghana with regard to the EITI may be considered successful and exemplary; however, over the years many citizens’ groups have expressed skepticism about the global EITI process with some objecting to civil society participating in the process. They contend that its scope does not address the core concerns of communities impacted by extractive industries. For instance, call for the inclusion of social and environmental audit of mining and energy companies as part of the EITI by some citizens’ groups have been ignored. So the GHEITI’s interest in subnational reporting is clear: to ensure that the impact of the EITI process is felt at the local level through accurate reporting of amounts received from companies and government, and that these payments are used for the intended purposes as determined by the communities themselves. For the companies, this level of reporting would help bridge the information gap and reassure them of a cordial business environment if communities are aware of the contributions they make.
Despite Ghana’s cumulative national and subnational accomplishments since voluntarily joining EITI such ongoing concerns suggests that there is still significant work to be done to institutionalize greater subnational transparency in the country.