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Joe Amoako-Tuffour (jtuffour@acetforafrica) St. Francis Xavier University,

Joe Amoako-Tuffour (jtuffour@acetforafrica.org) St. Francis Xavier University, Antigonish , Nova Scotia, Canada & African Centre for Economic Transformation Accra, Ghana Managing Natural Resource Revenue- The Case of Ghana 27-28 February , 2013 Maputo-Mozambique.

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Joe Amoako-Tuffour (jtuffour@acetforafrica) St. Francis Xavier University,

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  1. Joe Amoako-Tuffour (jtuffour@acetforafrica.org) St. Francis Xavier University, Antigonish, Nova Scotia, Canada & African Centre for Economic Transformation Accra, Ghana Managing Natural Resource Revenue- The Case of Ghana 27-28 February, 2013 Maputo-Mozambique

  2. Dividing The Oil & Gas Cake Compliments of Revenue Watch Institute Dr. Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  3. OUTLINE 1: Ghana’s Natural Resources Facts 2: Why Ghana’s Petroleum Revenue Mgmt Law? 3: Some Challenges & Guiding Principles in preparation of the Law 4: Public Participation and Public Preferences in the Making of the Law 5: Key Features of the Legislation 6:Is Act 815 a law for the sake having it? –Reporting, Governance, Auditing, and Public Oversight 7: Lessons and Challenges 2-years on Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  4. 1. Ghana’s Commodity Endowment Leading Exports Minerals (Gold, Manganese) Cocoa, Timber • Cocoa– 2ndlargest producer. – 34% of exports • Gold – Among top 10 exporters in the world, – 2nd exporter in Africa (after SA) • Minerals: 55% of total exports, 13% of GDP • Lumber - 9% of exports, nearly 8% of GDP • Oil and Gas (about 4-5% of GDP: 2011-13) • Oil Revenues (about 13%-20% of Total Revenue: 2011-2013) Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  5. 1. Western Basin 2. Central Basin 3. Eastern Basin 4. Voltaian Basin

  6. 2. Petroleum: Facts and Figures • Fast track Development since July 2007 • Reserves (Jubilee Field Development) • 800 Million Barrels of Oil • Upside of about 3.0 Billion barrels (MoE, Ghana Energy Policy, 2010). • 36.5OAPI Sweet Crude (Light, (Brent –WTI) • Gas potential (Associated & Non-Associated) • Phase 1 (120,000 bopd), Phase 2 (250,000 bopd) Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  7. How Much Revenues Should We Expect? Dr. Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  8. 2. Why Ghana’s Petroleum Revenue Management Law? 4 Reasons a) Lessons from International Practices b) Production Profile and Resource Depletion: 2011-2025 c) Lessons from Natural Resource Revenue Management d) Protect petroleum revenues from predatory expenditure earmarking

  9. c. Provisional Production Profile & Depletion Rate of Petroleum Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  10. c) Lessons from Managing Resources Revenues • No active or strategic approach to the use of mineral resources • No fiscal guidelines. • No clear cut administrative process on how to assess, how to collect and how to account for the revenues. Results: • Budget execution & fiscal policy mgmt. vulnerable to commodity price fluctuations. • Poor accountability and lack of transparency • No strategic savings from natural resource revenues –cocoa, timber & minerals • No considerations for inter-generational equity. • d) Protection from predatory statutory expenditure earmarking (e.g DACF). Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  11. 3. The Making of the Law 3.1 Six Challenges in the Design of Resource Revenue Management Framework 3.2 Five Guiding Principles 3.3 Ten Fundamental Questions 3.4 Public Participation & Role of Parliament

  12. 3.1 The 6 Challenges in the Design of Revenue Management • Assessment, Collection and Accounting Challenge • Inter-temporal Spending-Saving Challenge • Budget Allocation Challenge • Savings Management Challenge • Accountability, Transparency Challenge • Social Expectations Challenge Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  13. 3.2 The Guiding Principles • Petroleum revenue shall be integrated into the budget process. • Ensure additional revenue to support the development budget. • Establish fiscal guidelines - minimize potential negative effects on the management of the economy in general, and on public spending in particular. • Provide savings for future generations. • Maximize transparency and accountability in the collection, management and use of petroleum revenue. Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  14. 3.3 The Ten Questions 1. Who should assess and collect the revenues? 2. Should petroleum revenues be treated as part of general revenues? 3. How much of the revenues should be spent now? 4. What should be the spending priorities? 5. Should Ghana establish savings fund(s)? 6. Who should manage the fund(s), and how? 7. Who may authorize withdrawals from the fund(s)? 8. How do we ensure transparency and accountability? 9. How do we ensure adequate public oversight? 10. What safeguards may be needed to protect the revenues from abuses? Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  15. 3.4 Public Participation and the Making of the Law • Desk Research & Country Visits. • Nation-wide Town-Hall Consultations • Local media • Nation-wide Survey Questionnaire • Draft proposal of key issues posted online • Colloquium of academics, UNICEF forum for school children. • High-Level Institutional Consultations – Council of State, Bank of Ghana, President’s Economic Advisory Council, Individual Gov’t Agencies, IMF. World Bank, Revenue Watch, NORAD, Commonwealth Secretariat, DFID, GIZ, DANIDA, & NGOs Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  16. 4. THE GHANA PETROLEUM REVENUE MANAGEMENT LAW

  17. Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  18. Collecting Petroleum Receipts Royalties (oil & gas) plus AOE Actual Petroleum Revenues into PHF Carried and Participating Interest: Net revenue inflow from equity less NOC’s share Corporate Income tax NOC’s Dividend Other Revenues Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  19. Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  20. Institutions Involved in Revenue Management • Parliament • Ministry of Finance & Economic Planning • Ghana Revenue Authority • Ghana National Petroleum Cooperation • Auditor-General • Investment Advisory Committee • Public Interest and Accountability Committee Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  21. Savings-Withdrawal Model Active production period t< T* No more production, Depletion Allocation of $1 of Revenue Allocation after production period (t > T*) ABFA <= Dividends + real return on GPWF GPWF = GHF + GST(at T*) Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  22. MANAGING THE SAVINGS Parliament of Ghana Ministry of Finance & Economic Planning Bank of Ghana Investment Advisory C’ttee Operations Mgmt of Funds Oversees Investment Mgmt Via Investment Managers Advisory services to Minister Oversight functions Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  23. Structure of Delegation of Responsibility PIAC DELEGATION OF DUTIES IAC REPORTING Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  24. 5. KEY FEATURES (1/3) • Establishes the procedural, accountable and transparent mechanisms from assessment and collection of revenue to final use and management of savings; • Sets fiscal guidelines to determine the how much of the petroleum revenues may be spent through the budget and on how to allocate the savings. • Captures the desire of Ghanaians to save and the objection to direct revenue distribution. Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  25. (……2/3) 4. Establishes the Heritage Fund (HF) and the Stabilization Fund (SF) and allocates savings between them in a way that puts immediate emphasis on the need to ensure smooth and effective budget implementation. 5. Makes provisions for withdrawals from the SF to support budget implementation in the event of unanticipated shortfall in petroleum revenues. But places ceilings on the amount that can be withdrawn. 6. Places limitations on borrowing against petroleum revenues and savings. 7. Seeks to ensure and secure the efficient planning and proper execution and management of the national budget in the face of optimum petroleum revenue inflows; Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  26. (…. 3/3) 8. Makes great effort to respond to the needs for accountability and transparency. 9. Provides clear auditing, transparent and reporting mechanisms to safeguard the management of petroleum revenues; Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  27. 6. Is Act 815 a Law for the sake of Having a Law? • Preventing Political Conflict • Inconclusive 2012 electoral outcome • Efficiency Macro Mgmt • Deteriorating budget balances • Unprecedented fiscal overrun in peacetime (12% against target of 6%) • Fitch Downgrade • Rising Public Debt • Efficient Revenue Mgmt and Compliance • Institutional Coordination between GRA, MoFEP, GNPC • The technical capabilities of GRA & MoFEP • Overestimation of BR (ABFA) – limiting transfers to savings • Transparency and Accountability Challenges • Inconsistent reporting • Limiting public oversight (PIAC) Joe Amoako-Tuffour Oil & Gas Revenue Mgmt

  28. 7. Fine Law Embedded in Deep Seated Challenges in Budgetary Process and Public Financial Management • Comprehensiveness of Budget and alignment with MTEP and National Development Plan • Weak public financial mgmt. • Weak budgetary processes • Persistence of off-Budget Expenditures • Mgmt of public sector wage bill • Subsidies Is the law sufficient safeguard against weak economic governance?

  29. Finally, • Financing of the NOC • Fiscal risks and the oversight • Political patronage & the NOC as quasi-fiscal institution

  30. Policy borrowing, learning, and diffusion of best practices are common in developing policy. • Samuel Asfaha (2007): • Each country should undertake its own assessment and come up with the model that best reflects public preferences, cultural forces that shape public policy and fit the country’s political economic reality.

  31. THANK YOU

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