Ghana beats up on its biggest foreign investors.
President Obama headlined his first trip to sub-Saharan Africa last July with a stop in Ghana. Speaking to the parliament in Accra, Mr. Obama praised the country's growth and its example that "development depends on good governance." Eight months later, Ghana's government is turning the nation into a cautionary tale for foreign investors.
Exhibit A is the case of Kosmos Energy, a U.S. company based in Texas, which has lately seen capricious government meddling in a deal to sell a $4 billion stake in a Ghanaian oil field to ExxonMobil Corp. Ghanaian Energy Minister Joe Oteng-Adjei suggested in a letter to Exxon reviewed by Journal reporter Will Connors that the government would "support the strategic intent and efforts of [Ghana National Petroleum] to acquire Kosmos's Ghana assets at a fair market value."
By "fair market value," Mr. Oteng-Adjei means fire-sale prices. While the government insisted later that it would not block the Exxon deal, which is still in place, the desired affect was achieved. The strategy lets the government disavow its intention to directly intervene in deals while potentially scaring away potential buyers and making it possible for the government to buy the oil fields cheaply, possibly reselling them to a third party.
That's the kind of official thuggery more frequently associated with the likes of Nigeria, where the vast oil and gas resources have driven corruption and exploitation while the people continue to live in poverty. Until Kosmos's investment uncovered the Jubilee oil field in 2007, there had been little success in exploration in Ghana.
When Kosmos began its project under the then-ruling New Patriotic Party, the business environment seemed relatively stable with adequate protections for foreign investors. Under Ghana law, consent for a deal such as the one between Kosmos and Exxon can't be unreasonably withheld, delayed or denied. Such contract protection began to dissolve in January 2009, with the election of the leftist National Democratic Congress.
Other foreign investors are also getting the Kosmos treatment. In 2008 Vodaphone, the British mobile phone company, bought a 70% stake in Ghana Telecom. At the time, the company issued a statement that it was "delighted" to be "working in partnership with the Government of Ghana." By April 2009, the deal was on the rocks, as Ghana's government set up a "review committee" to question the details. Earlier this month, Ghana Vice President John Dramani Mahama insisted that the government wasn't planning to break the deal despite "concerns."
After getting a license for offshore exploration in November 2008, the Norwegian oil company Aker was told this year that its development license was invalid, though the agreement had been unanimously approved by Ghana's parliament. Aker investment manager Maria Moraeus Hanssen said the government position had "no basis in law or fact."
Attracting foreign investment has been a pillar of Ghana's development strategy, with the government pitching itself as the "Gateway to West Africa." Spooking new investors by repudiating contracts will rapidly ruin the country's prospects for long-term development.
The Obama Administration has so far been silent on the shadows now haunting the country it heralded as a source of hope and leadership in Africa. Getting the country back on the track of moderate good governance and respect for the rule of law would be an important example to set on the poorest continent.
