The extractives industry is a key contributor to Ghana's economy, but how can inclusive growth be ensured?
Areas of expertiseClimate, Energy, and Nature , Governance , Poverty and social protection (PSP) , Cross-cutting themes
KeywordsEnergy, resources and growth , Extractive industries , Gender, equality, and social inclusion , Public Sector Governance (PSG) , Social protection
ProjectGhana Oil and Gas for Inclusive Growth (GOGIG)
Oil revenues in Ghana are already a significant contributor to the West African country’s economy, contributing $3 billion between 2011 and 2015 – a reality accompanied by high expectations that the presence of rich natural resources will translate into development and economic returns. At present all of Ghana’s oil comes from offshore fields south of Ghana’s coastal Western Region, in the South Atlantic, but President Akufo-Addo has said that his government ‘is committed to intensifying efforts towards the discovery of oil and gas onshore in the Voltaian Basin’.
Whilst active and vocal civil society in Ghana has ensured that much discussion about the transparent management and fair distribution of oil revenues has remained high on the agenda, there has been less said about the local impacts of oil exploration and extraction on frontier communities. Offshore exploration has not been without its challenges – community claims that fishing restrictions are increasing competition, posing dangers to boats, and reducing available fish stock, contribute to a sense of having been ‘dispossessed’ and have potential negative impacts on the 2.4 million people in the country’s coastal region whose livelihood is fishing. Onshore oil exploration and extraction will inevitably bring a host of different local challenges.
There is a risk that the push for rapid expansion may undermine the principle of Free Informed Prior Consent and public participation (even though this is instituted in Ghana) – and that, once production gets under way, revenue sharing models will be contested by local communities. The Voltaian basin is large and diverse – home to some of the most marginalised groups in the country – and with the majority organized under chiefdoms, where traditional councils and authorities adjudicate on matters related to land, and disputes between localities. These customary land regulations co-exist alongside statutory land laws, adding another layer of complexity and exacerbating the potential for conflict in situations where governments and companies are taking charge of land management for the purpose of oil development.
Preparing for such challenges in the early stages, and responding to community concerns will be crucial to ensuring that operations at the centre of Ghana’s oil boom are genuinely inclusive, mitigating conflict with local communities. The following are some of the complexities and challenges of a growing extractives sector, and lessons for promoting inclusivity.
The Voltaian Basin has typically experienced relatively high levels of out-migration, especially from the northern part of Volta. However, other contexts, such as in the Turkana region of Kenya, demonstrate that the promise and perceived opportunities of oil and gas discovery are likely to attract in-migration to the region. In Turkana, many ethnic Turkanas have returned to the region from other parts of Kenya and traditionally nomadic communities have increasingly chosen to settle in the peri-urban centres springing up around oil exploration and extraction. Some towns grew by 500% between 2012 and 2014.
Whilst not inherently problematic, such a trend adds pressures to a large area of Ghana dominated by natural-resource intensive livelihoods such as agriculture, forestry, and fishing. In other contexts, such pressures have had damaging consequences. There have been several violent protests against oil companies in Turkana since 2013, and periodically oil companies and road building contractors have had staff attacked and facilities seized. More recently, armed gangs have violently seized potentially oil-bearing land and inter-communal violence has been exacerbated.
Indeed, there are lessons to be learnt from the (mis-)management of the mining industry in Ghana, where the rise in gold prices in 2008 intensified major in-migration of foreign miners, many from China. Without a rapid state response, the situation quickly escalated with officials reported to have ‘turned a blind eye’ to illegal foreign miners and mining companies involved in galamsey (a practice referring to illicit mining activities). This was despite Ghana’s legal framework which reserved the practice of small-scale mining for Ghanaian citizens.
By 2013 – the point at which the government responded with forced deportations and arrests – the damage to the industry, the environment, and ultimately to communities (as well as in lost revenue) was considerable. From mid-2012 onwards, local conflicts were reported regularly, including deaths and injuries as the result of clashes between Ghanaian and foreign miners (largely Chinese) but also with major tensions between young people and traditional authorities accused of ‘selling land’.
Whilst some benefited from the estimated millions of dollars generated from gold extractions between 2010 and 2013, for communities whose livelihoods were based on small-scale mining activities, the damage and destruction has been long-lasting. Beyond the tangible damage caused, existing inequalities have been intensified. For example, : galamsey leaders (invariably men) are now mining using improved technologies whilst women often work to eke out a living at abandoned sites, re-washing gravel for traces of gold.
Experiences from the Western Region, where land was obtained from farmers and cleared for the building of processing plants, highlight that negotiations and engagement fell short of farmers’ expectations. They reportedly received limited compensation for their land, while the benefits of potential revenue from the oil and gas production were not perceived as offsetting the damage to their livelihoods; processing plants employed relatively few local people. Indeed, Western Region Chiefs fought hard for a share in revenue distribution prior to 2011, but were met with significant pushback from government on account of receipt of complementary gas investment. The existing practice of revenue sharing in the gold mining industries in Ghana suggests that the benefits of the sector may not be felt by those whose livelihoods are affected, even though a share of royalties is returned to chiefs and communities. Given the challenging debate around redistribution – both from the ‘offshore’ context, where there were arguably fewer direct impacts on Western Region communities, as well as in the mining sector - experience suggests that this issue is likely to resurface.
How do we ensure inclusive growth?
Whilst the challenges are significant, there are methods of mitigating these through public policy. DFID’s Ghana Oil and Gas Inclusive Growth (GOGIG) Programme (implemented by Oxford Policy Management) is working to support legislative, policy, and administrative reforms to ensure Ghana’s petroleum sector will become a driver of inclusive growth. The programme, working with government institutions and oversight actors, supports interventions aimed at developing the regulatory framework, revenue capture, and management and accountability. As part of this, GOGIG identifies opportunities to promote greater participation (both in governance and productive processes) and promote wider access to the outcomes and benefits derived from growth for citizens, especially those disadvantaged or at risk of exclusion.
In anticipation of the move onshore, GOGIG recognises that this work with local communities will be increasingly important. Acknowledging the various potential challenges – which are evidenced from a host of other contexts – from the outset, will be vital. Early engagement, both at the policy level with relevant government ministries including the Petroleum Commission, and with communities themselves to understand key local dynamics such as land use patterns, gendered livelihood roles, and natural resource management strategies, is the key to ensuring both the stability of the region and delivering on the promise of genuinely inclusive development.
At the community level, there is evidence that communities do not distinguish between exploration and extraction activities – nor between the types of companies undertaking activities, making the importance of timely and meaningful interactions between different stakeholder groups even more important in establishing the foundations for future relationships. Early engagement provides opportunities to build the social license and mitigate against social risk and local impacts, also enabling stakeholders engaged in exploration and extraction to operate in a constructive environment.
The initial steps have begun. GOGIG recently supported a first engagement between the Petroleum Commission and civil society organisations to establish the beginnings of this dialogue, with a view to investing in multi-stakeholder engagement (community, industry, government) to mitigate risks. The first event provided an opportunity to share thinking and an approach on future engagement mechanisms, ensuring community concerns are captured and considered, and there is ongoing consultation with both demand and supply side actors.