How to ‘save’ Ghana from Petrodollars?

Introduction

Resources haven’t always been linked to wealth, as the management of resources in a country is always subjected to politicking. Ghana’s resources have been recently discovered, thus space for maneuver regarding how to make the best out of the natural supplies is given to the government.

What is known so far is that “oil discoveries in many countries have led to the erosion of democratic processes and insitutional structures” (Van Gyampo, 2011: 49). In other words, wealth generation does not equal resource abundance, and, by any means, an increase in the standard of living of the entire population. Moreover, the Ghanian exampe is illustrative on account of the government increasing its opacity. This can result in higher level of corruption and social unrest, as an inequality in the wealth distribution can generate social pressure. Countries with abundant resources and weak political systems are prone to having an authoritarian government or to face social disruption.

The pre-oil Ghana was “praised for its steady progress toward democratic consolidation” (Gyimah-Boadi & Prempeh, 2012: 94), with five elections being held under democratic principles, and autonomy being guaranteed to key institutions such as universities, mass-media, etc. Economically speaking, Ghana has an estimated influx of Petrodollars of about USD 1 billion (Kapela, 2009) per year, which constitues a great potential for development. This should be the focus of further research on the impact of oil discovery on Ghana, as development plans have the potential of generating economic wealth in a sustainable manner. The main question is ‘how to generate wealth from resource abundance, and how to invest Petrodollars in something sustainable for Ghana?’

Research proposal

The paper should focus on oil industry as a generator of wealth in Ghana, and try to tackle ways in which this could be made possible. Classically, transforming oil money in wealth is done through infrastructure development. What is more, the type of infrastructure that has to be developed differs from country to country. Nonetheless, even if infrastructure of any type is built, this doesn’t automatically create sustainability (Wood, 2007). This is caused by the contextuality determined by political and social factors. Of particular importance is to note that Ghana’s democracy is fundamentally different than other African counterparts dependent on oil exportation, with a political system that has developed into a relatively stable one. This creates a fertile ground for sustainability projects.

First, the disseration should focus on researching and outlining the modes in which the Ghanian government can use the influx of Petrodollars to enhance development, despite other bad examples in the region. Here are some areas of development that can attract funding from oil industry.

a) start-ups: Economic growth is striclty related to entrepreneurship. Can Ghanian government find a way to foster a capitalistic climate that can potentially generate wealth
b) infrastructure development: When we talk about infrastructure, we think about motorways construction, airport connectivity, etc. In fact, developing countries struggle to finalize those projects and often find that the expected positive externalities are overwhelmed by the negative ones. Roads can prove to be good connectors between two cities, but don’t generate wealth per se. A type of infrastructure with positive outcomes is IT infrastructure.
c) education: Sustainability is about creating a long-lasting positive effect over the next generations. Education is an important node of the wealth-creation network. The main concern is whether Ghana has the political will to use oil money for projects that can create wealth organically.

Therefore, the thesis should approach the topic of Petrodollars and how Ghana can be the first positive example of good resource management in Africa. This would relate oil industry to the broader picture of wealth creation and development.

How to tackle the research topic?

The methodological apparatus that should be employed here is diverse, however discretion is advisable. First of all, an extensive literature review on Ghana’s oil industry should be done in order to understand the underpinnings of the ‘newly created economy’. Second, the literature review should seek to understand the political system and how this was altered by the resource profusion. A comparative approach should be used here, especially a comparison between Ghana and Nigeria regarding institutional redesign in the light of resource abundance.

Second, there are more ways in which the study can be developed.

a) an empirical analysis of economic indicators that measure wealth and economic growth post and ante the oil discovery. This can take the form of an econometrical analysis that should test the correlation between Petrodollars cahsflows and development. The most accessible option is to run a multiple regression having as the dependent variables the economic growth, standard of living, and income inequality, and independent variables, revenues from oil indsutry, tax revenues, etc. Two patterns can arise. First, a positive correlation between the formers and the latters, thus the Ghanian government can be rendered as a good example of ‘oil revenues manager’. Second, a negative correlation can be found, confiriming the theory of fragiles democracy falling apart because of resource abundance. In any case, the assumptions made should be supported by a rigorous theoretical framework.
b) a fieldwork approach using structured interviews with local entrepreneurs that have benefited from or were disadvatanged by the emergence of the oil industry. If this approach is taken, a good guide can be provided by Hart (2007). This method can provide rich data about the micro implications of oil industry in Ghana and can allow for ground-up theoretical development.
Conclusions and recommendations

The discovery of the oil field in Ghana is still recent, thus not a lot of academic writing has focused on it. There are still many areas left unexplored, some of them presented above.

The recommendation is to focus on oil industry as an agent of change that has the power, in the right hands, to drive economic growth and wealth creation. Also, Ghana is a particular example in Africa, therefore careful attention should be given to details such as political stability and institutional systems.

The author should rely, if possible, on local access to information, and use the local language to bring to light some new information that otherwise would be impossible to discover. The recommended design of the research is a grounded theory approach, where the author will attempt to use a mix of secondary data analysis (e.g. Official documents, public discourses of government regarding oil industry, etc.) and structured interviews with local entrepreneurs.

References

Van Gyampo, R.E. (2011), Saving Ghana from Its Oil: A critical Assessment of Preparations so Far Made, Africa Today, vol. 57, no. 4, pp. 48-69;

Gyimah-Boadi, E., Kwasi Prempeh, H. (2012), Oil, Politics, and Ghana’s Democracy, Journal of Democracy, bol. 23, no. 3, pp. 94-108;

Hart, K. (2007), Small-scale entrepreneurs in Ghana and development planning, The Journal of Development Studies, vol. 6, no. 4

Kapela, J.M. (2009), Ghana’s new oil: cause for jubilation of prelude to the resource curse, Master’s project, Duke University

Wood, T. (2007), The Natural Wealth of Nations: Transformation of Oil- and Gas-Producing Economies, Cisco White Paper, 2007