Can Ghana can avoid the 'oil curse'? A few fresh concerns.

These are early days for Ghana and its off-shore oil, but recent wrangling over the ownership of exploitation rights raises fresh concern over whether the country can avoid the 'oil curse.'

Pete Souza/Official White House photo
MODEL NATION? President Obama shook hands with Ghanaian Members of Parliament after making speech to the Parliament at the International Conference Center in Accra, Ghana on July 11, 2009. Obama chose to visit the country because of its reputation as a model for good governance, but can Ghana avoid the 'oil curse'?

Hats off to the Financial Times for its superb coverage of Ghana’s handling of its off-shore oil resources, and the growing concern that neither the development of this oil, nor the profits produced by it, will be well managed and well used.

These are early days for Ghana and its off-shore oil, but last week’s news about wrangling over the ownership of exploitation rights raises fresh worries that Ghana, held up by the Obama administration as a model for good governance in Africa, is actually not.

Last fall I visited Takoradi, the nearest major city to Ghana’s offshore oil, and I was impressed by the cadres of African oil engineers – notably a group of Nigerians employed by Schlumberger – descending on the city as part of the advance efforts to ready the reserves for retrieval.

Takoradi is a gorgeous coastal town, a model for what’s going right in Africa’s medium-size cities. But even last year prices for basic goods and services were rising in Takoradi in anticipation of the oil flowing.

The creation of a super-rich oil “enclave” in Ghana, while perhaps inevitable, raises questions about whether the government really understands that managing its new oil wealth is not simply about spending the revenues wisely (as opposed to simply permitting government officials and their cronies to steal the cash) but there’s also the serious issue of preventing “Dutch disease,” whereby rising oil revenues leads to a weakening of Ghana’s service economy and rising prices generally.

Because of strong revenues from the export of cocoa and gold, Ghana stands a better than good chance of avoiding Dutch disease – since, admittedly, the country already suffers from it to an extent because of these older lucrative commodities. But as the FT highlights, the cruder problem – theft of oil revenues – remains a threat.

Much of the present sense of urgency surrounding how to exploit Ghana’s now-proven oil reserves turns on whether the former government of John Kufuour engineered a sweetheart deal that gave political insiders a stake – perhaps worth hundreds of millions of dollars, or even more than a billion – in the foreign production company that will harvest the oil in Ghana’s waters.

G. Pascal Zachary blogs at Africa Works.

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