This post is a short essay I wrote some months ago on the developmental benefits of Ghana’s Oil find. Enjoy reading !
DEVELOPMENTAL BENEFITS OF GHANA’S OIL FIND: SHORT ESSAY BY SOLOMON ELORM ALLAVI
These are most exciting moments to be a Ghanaian. Ghana is one of the most attractive markets in the Sub-Saharan Africa, in my view. It has a goal-oriented economic growth trajectory, abundant natural resources, a healthy demographic profile and a broad political stability. Our business environment is among the most conducive on the continent as well. For sometime now however, our fiscal spending has been curtailed and interest rates kept at punitive levels in a bid to keep a lid on inflation. Against this backdrop of macroeconomic woes, the onset of domestic oil production is very much welcomed by all of us especially we the youth of this dear nation.
Ghana’s oil and gas industry which is still in its infancy has significant upside potential. Petroleum production brings along numerous industries with its attendant socio-economic benefits such as production of plastics; wax, being a petroleum product, is used in the packaging of frozen foods and packaging blocks. Further, tar, a petroleum product is used in the treatment of skin diseases (psoriasis), as an anti-dandruff agent in shampoo and as a component in cosmetics. In the petrochemical industry, petrochemical feed stocks are used in various ways to produce polymers used in the manufacture of elastomer (rubber), fibre, gel or lubricants and many other products including fertilizer. These are all exciting news for us.
Ghana’s adoption of the Royalty tax system instead of the Joint Venture System in petroleum exploration and production activities is a laudable idea since it is less risky. The levies we will derive from the oil and gas exploitation include: Royalty at 5 per cent, Carried Interest at 10 per cent, Average Additional Interest at 3.75 per cent and Income Tax at 35 per cent. These gains, in my opinion, could be use to address the huge infrastructural deficits in the country in a form of improving access to good sources of drinking water for those prone to water-borne infestations. Secondly, modernizing the road, river, rail and air transport networks to facilitate carting of agricultural produce to market centers will enhance smooth movements of goods and people from one place to another. Thirdly, expanding delivery of quality education by addressing infrastructural drawbacks in the Junior, Senior High Schools and in the Tertiary institutions in the country. In addition, the electricity supply system in the country should be improved through the provision of constant access to power to enhance productivity.
Several opportunities in the associated industries are also coming into existence. In particular, we expect a boom in offshore services such as drilling and the provision of marine services including helicopters and lifeboats. Refineries are another growth area. The government plans to expand total refining capacity to 145,000b/d from the current 45,000b/d, which is conducted solely at the Tema plant. South Africa’s New Alpha Refinery is considering a project to build a 200,000b/d plant at Takoradi. This is the growth and development we actively seek.
Petroleum operations especially development and productions have the potential of transforming the economy through the participation of local Ghanaian businesses. Through the utilization of Ghanaian human and material resources for the provision of goods and services (local content) to the petroleum industry, jobs will be created and the wealth of individuals and the nation at large will be expanded. Ancillary businesses to be created in this industry include but not limited to
ü Onshore support and logistics
ü Banking and Real Estate services: financing opportunities, fund transfers, letters of credit financing rigs and supply vessels
ü Insurance for all equipment and facilities including personnel
ü Construction opportunities (installation and maintenance of instrumentation for production plants, electrical wiring of platforms and vessels et al )
With Ghana’s economy expected to grow rapidly over the coming years on the back of oil production, incomes are expected to rise in tandem. There are forecasts on GDP per capita soaring from US$695 in 2010 to US$1,419 by 2012 and US$2,462 by 2014. It is a truism that the gains will not be distributed evenly, especially as the oil industry is capital-intensive and is expected to employ relatively few Ghanaians. Nevertheless, there should be a fair amount of ‘trickle-down’, especially if the oil revenues are chanelled into labour-intensive investment projects that boost the productive potential of the economy.