Ghana's Energy Sector, Oil and Gas News

The Public Interest and Accountability Committee (PIAC) has urged the government to endeavour to utilise petroleum revenue meant for capacity building on interventions that will directly enhance the capacity of Ghanaians to play a bigger role in the emerging oil and gas industry.

It has also charged the government to ensure that allocations for the annual budget funding amount (ABFA) to road and other infrastructural projects are prioritised to make a more meaningful impact on the budget.

That, it said, would ensure that such projects were completed in a much shorter time to avoid cost escalations.

The call by the PIAC formed part of recommendations contained in the annual report on the management of petroleum revenue for 2013 which was released in Accra yesterday.

Wrong classification

The Chairman of the PIAC, Major Daniel Sowa Ablorh-Quarcoo (retd), touching on highlights of the report, said capacity building appeared to be a category under which certain expenditure which might not be related to that, had been classified.

He said approximately GH¢23 million, representing 17 per cent of the ABFA earmarked for capacity building from 2011 to 2013, found its way into consumables, GH¢2 million was used to support the creative industry, while another GH¢8.1 million was given out as cash transfer under the Livelihood Empowerment Against Poverty (LEAP) programme.

Priority area demoted

“Some GH¢35 million was allocated to the Microfinance and Small Loans Centre (MASLOC), while another GH¢19 million has been used to set up the Venture Capital Fund and the Exim Guarantee Fund. 

“In spite of these, only GH¢8.93 million, representing 6.7 per cent of the total allocation to the capacity building priority area, has gone into developing capacity in the oil and gas sector over the three-year period between 2011 and 2013,” Major Ablorh-Quarcoo said.

The PIAC also charged the government to conduct an immediate evaluation of the effectiveness and impact of all the projects and programmes that had been funded with revenue from the petroleum sector to help inform the citizenry and also provide the basis for spending allocations in the next priority area review period.

Need for national development plan

In order to prevent the recurrence of spreading ABFA funds thinly over a wide range of projects that made little impact on the economy, the PIAC recommended a long-term development plan.

“The government of Ghana should, therefore, prioritise and provide the necessary resources for the formulation of a non-partisan, long-term National Development Plan to guide the efficient and effective utilisation of petroleum revenue,” it said.

The report said total petroleum revenue in 2013 was US$846,767,184, converted to GH¢1,645,585,763, thereby bringing cumulative revenue received since 2011 to US$1.833 billion, equivalent to GH¢3,291 billion.

Projected revenue exceeded

It said actual petroleum revenue exceeded projected revenue by nearly 46 per cent, thereby raising questions about the determination of the benchmark revenue.

“The situation has arisen because all the components used in the estimation of the benchmark revenue were lower than the actual turnout. 

“Estimated daily production and expected average price per barrel were lower than the actual. This, combined with the low estimated corporate taxes in the year when taxes were expected to be higher, resulted in low benchmark revenue used for the budget projections,” the PIAC said.

The government of Ghana, it said, complied with legal regulations by paying all excess petroleum revenue into the Ghana Petroleum Funds (GPFs).

The move to cap the GSF

That situation, the report observed, led to a move by the government to trigger Section 23 of the Petroleum Revenue Management Act (PRMA), which allows the Minister of Finance to recommend a cap on the Ghana Stabilisation Fund (GSF).

The process to cap the GSF at US$250 million, it recounted, was announced during the presentation of the 2014 budget statement to Parliament in 2013.

However, the PIAC recommended that any future proposal to cap the GSF should be guided by the specific rules governing withdrawal from either the GSF or the Ghana Heritage Fund, adding that “these rules must be respected”.

Writer’s email: victor.kwawukume@graphic.com.gh