GHEITI advocates investment guide to monitor petroleum funds
The Ghana Extractive Industry Transparency Initiative (GHEITI) report on the Oil and Gas sector for 2014 has recommended the development of an investment guide that will help to effectively monitor the performance of the Ghana Petroleum Funds (GPF).
It said the measurement of the performance of the GPF by the Bank of Ghana (BoG) did not conform to the provisions of the Petroleum Revenue Management Act (PRMA), Act 815, hence the need to adhere to the provisions of section 30 (1) c.
Section 30 (1) c of Act 815 states that the Investment Advisory Committee (IAC) shall develop for the minister as part of the guidelines, the benchmark portfolio, the desired returns from and associated risks of the GPF subsequently by the Ghana Petroleum Wealth Fund (GPWF), taking into consideration the investment guidelines used by the BoG for investments of a similar nature.
In an interview with the GRAPHIC BUSINESS, an oil and gas economist, Dr John Gatsi, said that such an investment guide, generally referred to as investment policy, was needed to provide direction for those who would manage the fund in a manner that the interests of the resource owner would best be served
However, he said, it was debatable as to whether it was necessary to have a written investment policy for the GPF or not.
“The reason is that most of the things that guide investment managers which are supposed to be captured in the investment policy have already been captured in the Act. First, the schedule attached to the fund defines the area that the GPF should be invested in and they are generally referred to as qualifying instruments which have been defined,” he said.
According to him, “the first purpose is to protect the fund which we refer to as the preservation of capital. That is why in our case the law does not allow the fund to invest in equity instruments but to invest it fully in debt instruments because in that case you will be in a position to protect at least the capital and earn some marginal on the investment of the capital.”
Dr Gatsi said because the Act also captured the role of BoG and its experience, there was no need to write a benchmark of interest rate.
That, he said, was because from time to time it will be known and BoG’s experience in investing in similar funds would be brought on board to decide, as the operational manager of the fund, to determine whether it is proper to invest in this type of bond and that the Act has stated.
“So that is why I am saying it is debatable whether we really need to put down an investment policy or guide to effectively invest in the GPF,” he said.
Contents of the guide
He also said that usually it should define the instruments that the owner is interested in as it guides investors.
“In this case because it’s a state fund, you don’t want to invest and then the investment will go bad so you choose an investment that will protect the capital, at least. The reason why the BoG is interested is because over the years it has a track record of managing and investing similar funds on behalf of the state,” he said.
About GHEITI
The Extractive Industries Transparency Initiative (EITI) is a global initiative whose mission is to promote transparency and accountability in the generation and use of extractive-sector revenues.
The Ghana version of the initiative is called the Ghana Extractive Industries Transparency Initiative (GHEITI).
Some objectives of the GHEITI are to enhance the demand-side of social accountability by providing public insight into revenues derived from the exploitation of the country’s mineral and oil and gas resources.
It is also to create a platform for public debate on the spending efficiency of extractive-sector revenues, identify gaps and weaknesses in resource revenue management and make recommendations to prevent revenue leakage.— GB