The raging battle over who keeps watch over expected cash from Ghana’s Jubilee Oil Field, who uses it and when, entered another phase over the weekend, with a new entrant, Vice President John Mahama, throwing punches at opponents to government’s attempt to amend the Petroleum Revenue Management Bill, in order to allow for Government to collateralize the revenue for investment.
Referring to Clause 5 of the Bill, which forbid collateralizing the oil revenue,
The Vice President questioned the Minority, New Patriotic Party (NPP) for
supporting this clause, saying it did not make sense, and craving the indulgence to borrow George Bush’s phrase, ‘that’s absolutely, excuse my language, George Bush; Baloney!”
Mr. Mahama, who was addressing members of the Tertiary Educational Institutions Network (TEIN) of the ruling National Democratic Congress (NDC), explained that the bill was drafted with assistance from the Norwegians, who had subsequently clarified the point that they introduced the Heritage fund at a time they already had their major infrastructure laid.
He called for support for the intended amendment in order to deal with Ghana’s infrastructural deficit, which he said the World Bank had put at 1.6 billion dollars annually, as it would be foolish to stash the money away even as the country begged for infrastructural development such as roads.
The Bill which was introduced by the Government, had a dose of the World
Bank/International Monetary Fund (IMF) influence, which required in clause 5, titled: Prohibited Use of Petroleum Account,that:
(1) The assets of the Petroleum Account shall not be used to provide credit to the government, public agencies, private sector entities or any other person or entity and shall not be used as collateral for debts or other liabilities of any other entity. (2) There shall not be any borrowing against petroleum reserves by government.
Already the VEEP has caught fire, as half-a-dozen of minority NPP members have swiftly countered his argument, questioning its basis, since the controversial clause was introduced to the House, in the first place, by the Executive.
Minority Leader, Osei Kyei Mensah Bonsu, Joseph Adda, MP for Navrongo Central, K.T. Hammond, MP for Adansi West, Kennedy Adjepong, MP for Assin North, Dan Botwe, MP for Okere Constituency have all described the Veep’s comments as unwarranted.
In a sharp rebuttal on Monday, the Minority Leader questioned the basis for the Vice President’s harsh words, since the original Bill before Parliament was introduced by the Executive, of which the latter was a key part.
Dan Botwe also shared the same position, saying if the Veep’s position were to be taken seriously, then the government was more deserving of the harsh words since the clause in the original position he was criticizing was introduced by Government.
Kennedy Adjepong described the Veep’s criticism of opponents to the proposed amendment as a fallacy of Argumentum Ad Hominen (a situation where one attacked the personality of his opponent rather than the issues involved in the argument).
Mr. Kwame Jantuah, a member of the Convention People’s Party (CPP) and also of a civil society coalition on oil and gas, said there was no justification for collateralizing the oil money, since the country would have continued with its developmental programmes without oil money, anyway.
Dr. Paa Kwesi Nduom, a former Minister for Energy under the NPP regime and CPP Presidential candidate for the 2008 elections would rather have 20% of the revenue being set aside in the heritage fund instead of the proposed 10%.
He said the Norwegians and Americans have institutions that worked and therefore there was no basis for comparing what pertained there with Ghana’s. Mr. Jantuah said even though the oil revenue would give respite, “We shouldn’t use it to collateralize any loan,” he emphasized, saying the money should be invested in profitable developmental projects.”
Kwesi Pratt, a member of the Socialist Forum and Managing Editor of The Insight newspaper, as well as Dr. Sam Mensah an investment consultant, on the other hand have both described as unreasonable the stance against collateralizing the oil revenue, considering the infrastructural deficit that confronts the nation.
DEBATE IN BORROWED TIME
Meanwhile, the tango between the Minority and majority over whether to
collateralize or not to collateralize the Jubilee oil cash in Parliament
continued fiercely on Monday, ending with the Minority Leader, calling for a time-out in the form of postponement, to allow for further consultations.
The Minority leader’s call which was concurred by the majority leader, after
the two had disagreed over the proposed amendment, has left the Petroleum Revenue Management Bill still hanging, with first oil scheduled to flow on
December 15, 2010. See Page 13 for the other sections of the Bill that deal
with the Oil Revenue Management.
The Business Analyst Page 13 Management of the Petroleum Reserve Accounts expenses
11.(1) The Bank of Ghana shall deduct reasonable management expenses from the petroleum receipts of the Petroleum Reserve Account by direct debit. (2)The deduction shall be in accordance with the best international practices and as provided for in the Operations Management Agreement.
Allocations and disbursements
Establishment of the Stabilisation Fund
12. (1) There is hereby established the Stabilisation Fund
(2) The objects of the Stabilisation Fund are to (a) cushion the impact on or sustain public expenditure capacity during periods of revenue shortfalls whether caused by a fall in the petroleum price or through production changes; and (b) cushion the economy from the impact of unanticipated petroleum revenue shocks and safeguard macroeconomic stability.
Establishment of the Heritage Fund
13. (1) There is hereby established the Heritage Fund. (2) The object of the Heritage Fund is to use part of the savings as investment to (a) generate an alternate stream of income to support public expenditure in the long run; and
(b) provide a heritage for future generations of citizens from savings derived from excess revenue.
Funds in the Stabilisation and Heritage Funds
14. The funds in the Stabilisation and Heritage Fund collectively referred to
as the Petroleum Funds shall be denominated in United States Dollars or any other convertible currency approved by the Minister for the sole purpose of saving and investing part of the petroleum revenue.
Transfers and allocation into the Petroleum Funds
15. The transfers into the Petroleum Funds from 2011 shall be as follows:
(a) where petroleum revenues collected in each quarter exceed one-quarter of the estimated annual budget funding amount of the financial year, as determined by the allocation and disbursement formula from the Petroleum Account,, the United States Dollar equivalent of the excess revenue shall be transferred from the Petroleum Account to the Petroleum Funds;
(b) the transfer and any subsequent transfer shall be made no later than the
end of the month following the quarter in respect of which the excess revenue was calculated; and
(c) A minimum of eighty percent of the aggregate of the excess revenue shall be deposited into the Heritage Fund and the balance shall be deposited into the Stabilisation Fund each financial year.
Outflows from the Stabilisation Fund
16. (1) Where the petroleum revenue collected in the first two quarters of each financial year falls below one-half of the estimated annual budget funding amount by at least ten percent for that financial year withdrawals may be made from the Stabilisation Fund as follows, whichever is the lesser amount:
(a) either seventy-five percent of the estimated amount of the shortfall of
petroleum revenues for that year; or
(b) thirty percent of the balance standing to the credit of the Stabilisation
Fund at the beginning of that year.
(2) The amount withdrawn shall be deposited into the Consolidated Fund within twenty-four hours after the withdrawal.
(3) Transfer out of the Stabilisation Fund shall only be done for the purpose
of alleviating shortfalls in the national revenue and in accordance with
(4) The real rate of return from the Stabilisation Fund shall be treated as
part of the current year’s petroleum income in the First Schedule to determine the Annual Budget Funding Amount.
Additions and withdrawals from the Heritage Fund
17. (1) Additions to the Heritage Fund shall be according to the rule specified in section 15.
(2) Withdrawals from the Heritage Fund shall be according to the withdrawals rule in section 20.
(3) The rate of return on investment from the Heritage Fund shall be treated as part of the current year’s income in the First Schedule in determining the
Annual Budget Funding Amount.
Payments into the Petroleum Reserves Account
18. An obligation to make a payment into the Petroleum Account; the
Stabilisation Fund or the Heritage Fund shall not be discharged until the entire amount has been deposited, integrally and unconditionally, into the respective earmarked receipts accounts.
Adjustments and reconciliations to petroleum reserves accounts
19. (1) No later than February 15th of each year, commencing 2012, the Minister shall reconcile the actual total petroleum receipts and the estimated annual budget funding amount of the immediate preceding year and shall submit a written report to Parliament after audit by the Auditor-General. The report shall include the following information:
(a) the annual budget funding amount for the immediately preceding two years; (b) the estimated sustainable income for the current and immediately preceding two years or calculated according to the Second Schedule;
(c) the actual inflows and outflows of the Petroleum Account for the current
year; (d) the balance of actual receipts over the Annual Budget Funding Amount; (e) recommendations for the reconciliations and adjustments needed to account for any deviations so the (i) inflows and outflows relating to the Petroleum Funds match the actuals of the year; (ii) Petroleum Account balance shall be reset to zero.
(2) The report shall be published in the Gazette and two state owned
newspapers, no later than March 1 of the same year.
Allocation and disbursement from the Petroleum Account
20. (1) Disbursement from the Petroleum Account shall only be made
(a) for fixed collection expenses; (b) for management expenses of the Petroleum Reserve Account; and (c) to the budget and the Petroleum Funds.
(2) No later than September 1st of each year, the Minister shall determine
(a) the benchmark revenue using the formula set out in the Second Schedule; and (b) the estimated sustainable income according to the formula set out in the Second Schedule.
(3) For the year 2010, the annual budget funding amount, the amount of petroleum revenue to support the budget shall be what the Minister recommends out of the 2010 petroleum receipts, if any.
(4) For the period 2011 to the year when there shall be no more petroleum
production, the annual budget funding amount shall be seventy percent of the benchmark revenue as calculated and certified according to the First Schedule.
(5) From the year marking the end of crude oil production (a) the annual budget funding amount from petroleum resources shall be equal to the sum of royalties from gas operations, if any, corporate income tax on gas commercialisation, dividends from the national oil company and the real income or earnings on the Petroleum Funds as calculated and certified by …; and (b) the income or earning on the Petroleum Funds shall be equivalent to the real rate of return on the balance of the Petroleum Funds on December 31 of the previous fiscal year.
Transfers from the Petroleum Account
21.(1) Transfer from the Petroleum Account to the Consolidated Fund for budget funding shall be in quarterly installments of one-quarter of the annual budget funding amount or as the Minister may recommend.
(2) The total amount withdrawn from the Petroleum Account for budget support for any fiscal year shall not exceed the appropriation amount approved by Parliament for that fiscal year in accordance with section 20.
(3) Transfers from the Petroleum Account by the Bank of Ghana in any fiscal
year shall only take place after publication of the budget in the Gazette
confirming the appropriation amount approved by Parliament for that fiscal year.
(4) The key decision parameters in the formulas in the First and Second Schedule and for 2010 shall be reviewed every three years with the first review to occur in 2014.
(5) The review shall be conducted by the Minister in consultation with the Bank of Ghana and the Board.
(6) The review shall be subject to ratification by a resolution of Parliament
supported by the votes of not less than two-thirds of the members of Parliament.