Extractives Sector Transparency (GH0024)

What is the public problem that the commitment will address?: Ghana is endowed with substantial natural resources (e.g. gold and petroleum). Sadly however, Ghana has not been able to unleash the development potential of its natural resources to propel economic growth and reduce extreme poverty among its people. Even though efforts are being made at transparency in the management of resources from the extractives sector, a lot more needs to be done.; What is the commitment?: The commitment will help develop the LI for (MDF) Act; finalize the LI for PRMA; and support PIAC to enforce its recommendations.; How will the commitment contribute to solve the public problem?: The commitment is to make public all information on the usage of resources from the extractive sector. By developing the LIs for the key extractive sector’s legal documents, the legal documents can them be operational. The commitment also provides financial and non-financial information as well as the status of implementation of petroleum revenue funded projects for citizens to know the usage of proceeds from oil sector. MMDAs will provide information to citizens on the usage of mineral royalty revenues.; Why is this commitment relevant to OGP values?: The commitment will help disclose more information on the usage of resources from the extractive sector. It will also help to improve rules and regulations regarding the extractive sector to bring about transparency and accountability.

5. Extractives Sector Transparency

Language of the commitment as it appears in the action plan:

‘The Government proposed to pass the Minerals Development Fund (MDF) Bill in the second action plan and this has been carried out. However, there is the need to pursue this by developing regulations for the Minerals Development Fund Act (MDFA). In the second action plan also the government proposed to develop regulations (Legislative Instruments) for the Petroleum Revenue Management Act of 2011 (Act 815) to effectively operationalize the amended law so as to detail out how the various clauses are to be interpreted and applied. The process commenced during the period of the second plan but was not completed. The government commits to develop the Legislative Instruments for Minerals Development Fund Act and complete the LI for PRMA. PIAC will also be supported to enforce its recommendations.’

Milestones/Activities:

• MoF and AG to finalize the development of regulations to Petroleum Revenue Management Act 2011 (Act 815) by September 2018;
• MoF and AG to develop regulations to the MDFA by August 2019;
• MoF to provide financial and non-financial information as well as the status of implementation of petroleum revenue funded projects by November 2018;
• Ministry of Lands and Natural Resources (MLNR) and the Minerals Commission to establish the necessary structures for the management of MDF (Governing Board, Fund Manager, and office) by December 2018;
• MoF and Local Government Service (LGS) to ensure Metropolitan, Municipal, and District Assemblies (MMDAs) provide quarterly reports on the usage of mineral royalties by December 2018;
• MoF and Parliament to review PIAC’s mandate to ensure PIAC enforces its recommendations by June 2018’

Start Date: November 2017

End Date: August 2019

Action plan is available in this link

Context and Objectives

Revenues from the exploitation of natural resources have long been a key source of income in Ghana’s economy. From 2012 to 2016 alone, mining receipts totaled at least US$1.59 billion. [40] Ghana is the second largest producer of gold in Africa and the ninth largest producer of diamonds in the world. ^[41] Oil revenues first surpassed mining receipts in 2013 following the onset of oil production in 2011 [42] (oil was first discovered in commercial quantities in 2006). Extractives revenues fell sharply in 2015, but oil and gas revenues remain the most lucrative natural resources. [43] Civil society organizations like the Natural Resource Governance Institute (NRGI) and the Ghana Oil and Gas for Inclusive Growth (GOGIG) are concerned that fiscal indiscipline may have worsened in light of oil revenues that were expected to provide economic relief and that public management of these revenues is not helping further national development. [44]

In separate interviews with the IRM researcher, Nafi Chinery, country program manager of the Natural Resources Governance Institute, and Jo Ann Sackey, senior policy analyst with the Africa Centre for Energy Policy, queried the acute non-availability of comprehensive data on extractive-funded contracts and low levels of completion of some extractive-funded development projects, citing these as evidence that both laws are not being implemented as stipulated. [45] As part of efforts to help maximize the contributions to development of Ghana’s earnings from its natural resources, the government passed two laws: the Minerals Development Fund (MDF) Bill 2014 in February 2016 and the Petroleum Revenue Management Act 2011 (Act 815) (PRMA) in August 2016. It should be noted that the National Democratic Government under Jerry Rawlings created the MDF in 1993, but the fund did not have legal backing, as there was no supporting law until 2016. ^[46] Against this background, this commitment aims to promote greater transparency and accountability in the management of extractives’ revenues in Ghana.

The PRMA has been implemented without regulations for eight years since it was first passed, making the proposed development of regulations for both laws critical. The absence of regulations may be responsible for some gaps that GOGIG identifies in the PRMA’s implementation so far. [47] In one example, Article 21(3) states that “the spending of petroleum revenues shall give priority to but not be limited to” a list of 12 areas. Public Interest and Accountability Committee [48] sees this as leeway that the government can exploit to divert revenues to either non-priority or non-budget areas that can create or worsen imbalances in the national economy. Also at issue are transparency concerns over the utilization of the Sinking Fund, which is supposed to hold a percentage of oil revenues from the Stabilization Fund to reduce maturing debts and prevent debt defaults or refinancing at high interest rates. ^[49]

Moreover, a study conducted by the Natural Resource Governance Institute found that PRMA’s implementation faced some challenges, including disclosing the information of projects such as the total value of the contracts and difficulties in understanding and interpreting the law by policy makers, linking petroleum revenue with a broader spectrum of agencies and strategies for financial management at the national level. [50] On the other hand, according to Mr. Kwaku Asomah-Cheremeh, minister for Lands and Natural Resources, the lack of regulations for the Minerals Development Fund Act, 2016 (Act 921) and ambiguities of the act had become key obstacles for ensuring a transparent implementation. [51]

This commitment seeks to make public all information on the usage of resources from the extractive sector by providing financial and nonfinancial information along with the status of implementation of projects and by enabling the legal framework of the Petroleum Revenue Management Act and the Mineral Development Fund.

This commitment is relevant to the OGP value of access to information. As stated, queries about access to information on the status of implementation of petroleum revenue-funded projects make the proposed provision of financial and nonfinancial information, including on the usage of mineral royalties, vital in the interests of transparency and relevant to the OGP value of access to information. As for public accountability, the commitment does not necessarily explain how the information reported on projects (extractive industries) will translate into consequences or change, particularly in regard to those who hide the information from public audiences.

As written, this commitment is for the most part, verifiable. Verifiability can be assessed, for instance, by seeing whether regulations for the Petroleum Revenue Management Act 2011 and the MDFA are provided. Financial and nonfinancial information and the status of implementation of petroleum revenue-funded projects must also be provided for this commitment to be verifiable.

If implemented as written, this commitment will contribute to solving the problem of lack of transparency in the extractives sector, although not to a full extent. Therefore, the potential impact of this commitment is coded as “moderate.” According to Nafi Chinery and Jo Ann Sackey, [52] the milestones are very relevant and would help achieve the set objectives if they are implemented as written. They both told the IRM researcher that information on the status of implementation of petroleum revenue-funded projects is severely lacking and thus applauded this milestone. As observed by Nafi Chinery and Jo Ann Sackey in separate interviews, [53] Ghana’s mining sector is much less structured than the petroleum one, necessitating a separate regulatory framework to ensure that it receives the same level of scrutiny as petroleum does. [54] By this token, creating the structures needed to manage the MDF is essential for it to function effectively. However, the commitment does not address underlying issues such as the politicization of contracting and awarding of projects to ruling party cronies, some of whom are difficult to monitor. [55]

The commitment’s final activity, which aims to review PIAC’s mandate to ensure it enforces its recommendations, is more ambiguous than the others. The IRM researcher thus validates the Public Interest and Accountability Committee’s opinion that although there is some level of transparency in natural resource revenue management, accountability is lacking and should be the focus of all interventions going forward. Providing information on projects related to extractive industries is relevant for the country and useful as a tool to prevent fund mismanagement; yet, as stated before, more specific activities/milestones enforcing public accountability, for instance, in cases where information on projects is being kept from the public unlawfully, clear mechanisms for prosecuting those instances might reinforce the scope of this commitment. It may be the case that the regulations aim toward that end, but this cannot be inferred, as written in the action plan.

Next steps

• It is recommended that this commitment be continued, with improvements in public accountability activities, with clear rules and details, aiming at prosecuting officials who hide/cover up information of extractives unlawfully.
• Going forward, the NAP could take better account of the broad range of issues relating to this theme, for example, the debate about developing separate legislation for mining, and address them explicitly.
• To make a tangible change, the regulations will need to address such gaps in collaboration with civil society experts like GOGIG, ACEP, and PIAC that have done extensive research and nationwide advocacy on these issues.
• It is important for assessment purposes for future milestones to distinguish baselines from potential change. For example, the activity of reviewing PIAC’s mandate would be more verifiable if it identified existing gaps and specifically how the Ministry of Finance and Parliament would address these during the review.
• Citizen groups within communities where development projects are allocated should be integrated into monitoring processes and made aware of contract terms to empower them to ensure that contractors meet agreed standards and complete assigned projects. It is vital that proposed implementation structures of both the MDF and PRMA be selected carefully and allowed to function independently to enhance transparency and accountability and to help Ghana make the most of its natural resources.

5. Extractives Sector Transparency

Commitment text: The Government proposed to pass the Minerals Development Fund (MDF) Bill in the second action plan and this has been carried out. However, there is the need to pursue this by developing regulations for the Minerals Development Fund Act (MDFA). In the second action plan also the government proposed to develop regulations (Legislative Instruments) for the Petroleum Revenue Management Act of 2011 (Act 815) to effectively operationalize the amended law so as to detail out how the various clauses are to be interpreted and applied. The process commenced during the period of the second plan but was not completed. The government commits to develop the Legislative Instruments for Minerals Development Fund Act and complete the LI for PRMA. PIAC will also be supported to enforce its recommendations.

Milestones/Activities:

• MoF and AG to finalize the development of regulations to Petroleum Revenue Management Act 2011 (Act 815) by September 2018;
• MoF and AG to develop regulations to the MDFA by August 2019;
• MoF to provide financial and non-financial information as well as the status of

implementation of petroleum revenue funded projects by November 2018;

• Ministry of Lands and Natural Resources (MLNR) and the Minerals Commission to establish the necessary structures for the management of MDF (Governing Board, Fund Manager, and office) by December 2018;
• MoF and Local Government Service (LGS) to ensure Metropolitan, Municipal, and District Assemblies (MMDAs) provide quarterly reports on the usage of mineral royalties by December 2018;
• MoF and Parliament to review PIAC’s mandate to ensure PIAC enforces its recommendations by June 2018

Editorial Note: For the full text of Ghana's 2017-2019 Action Plan please see: https://www.opengovpartnership.org/documents/ghana-action-plan-2017-2019/

This commitment aimed to promote greater transparency and accountability in managing extractives’ revenues in Ghana. It responded to concerns about mismanagement of resources from national extractives endowments ^[47] as evidenced by “the acute non-availability of comprehensive data on extractives-funded contracts and low levels of completion of some extractives-funded development projects.” ^[48] Civil society experts believe this indicates that extractives laws “are not being implemented as stipulated.” ^[49]

This commitment had limited completion. Regulations were not passed for the Petroleum Revenue Management Act, 2011 (Act 815) or the Minerals Development Fund Act, 2016 (Act 912). However, the Finance Ministry did provide financial and nonfinancial information on petroleum-funded projects in 2018 and 2019. ^[50] The Minerals Development Fund Board was sworn in on April 2019, four months behind target, ^[51] but the board does not appear to be active. Progress regarding the remaining activities could not be ascertained. ^[52]

Government ^[53] and civil society actors ^[54] viewed the absence of regulations for both the Petroleum Revenue Management Act (PRMA) and the Minerals Development Fund Act, 2016 (Act 921) as responsible for gaps in implementing both laws and, in turn, incomplete implementation of this commitment. ^[55] The Natural Resource Governance Institute identified the additional challenges to the PRMA’s implementation: difficulties in understanding and interpreting the law by policymakers, linking petroleum revenue to a broader range of agencies, and inadequate strategies for national financial management. ^[56]

This commitment was relevant to the OGP value of access to information and it contributed a marginal improvement in this regard. The Ministry of Finance published annual reports on the use of petroleum revenues that could be downloaded on its website. ^[57] However, these reports did not give detailed updates on the implementation of petroleum-funded projects, and this information could not be found from other sources. The IRM Researcher could not find publicly accessible evidence of quarterly reports on mineral royalties by MMDAs. This commitment would have had a greater open government impact had the government fully established regulatory and institutional structures necessary for extractives transparency, such as the Minerals Development Fund Board.