‘Petropolitics’, NDC and Hypocrisy!

Mon, 6 Jul 2009 Source: Opare-Asamoa, Yaw

Yaw Opare-Asamoa


I am tired of the hypocrisy that has so much permeated our political culture. I am beginning to wonder whether it’s even worth continuing to write about it. The NDC is in power and they find themselves unable to fulfill some of their pre-election promises; but instead of coming clean with Ghanaians and conceding the fact that they were wrong about some of the issues particularly that of ‘fuel pricing’ here they are doing what they know to do best: blaming the previous government for their actions (or rather inactions). The NDC does have some knowledgeable people and so they knew what the true situation was as regards the international crude market and the politics involved. They knew that it was unsustainable for an economy like ours to continue to subsidize fuel for the ‘ordinary Ghanaian’ but they used this very fact to ‘hammer’ the then NPP government at every turn all in the bid to make the NPP unpopular with the Ghanaian electorate. Yes, they succeeded and now it’s their turn. A couple of months back the Atta Mills government announced reduction in fuel prices; that was done purposely to satisfy an election promise! At the time, some NPP parliamentarians in the know, told us that the reduction was a’ gimmick and that the prices would go up again. This was followed by the usual ‘back-and-forth’ and trading of ‘insults’ that have so much come to characterize our political landscape. But alas, it came to pass that the NDC government increased fuel prices by 30%. I absolutely have no problem with full-cost recovery. I believe we should pay fair prices for what we consume. My problem is the hypocrisy involved. Didn’t the NPP talk about full-cost recovery when it established the National Petroleum Authority to oversee pricing and regulation of petroleum activities in the country? Actually what the NPP did was to tie the local price to that on the international market, such that crude oil price fluctuations would correspondingly reflect on the local market. What was NDC’s reaction then?? The NDC argued that the so-called ‘property-owning’ ideology of the NPP makes the NPP government insensitive to the suffering of the masses and that they, NDC, the party with socialist credentials (Vice-president John Mahama was reported to have said so) would do otherwise. Let’s look at the ways the NDC has tried to ‘explain’ this fuel price increases and determine how different theirs have been from those given by the NPP then: The deputy minister for Energy tells us that “...the NDC government will insist that the increases in oil prices are passed on the consumer while effective measures are put in place to ensure efficiency in production and consumption.” Really?? Member of Parliament for Gomoa West, Francis Kodjo Arthur, has “…appealed to Ghanaians to regard the recent increases in the prices of petroleum products as a necessary evil to keep the economy on track.” Wonderful! I guess when the NPP increased the prices it was to keep the economy off track!! He went on thus: “It (price increase) must not be regarded as a sign of insensitivity of the government to the sufferings of the citizenry” Now where was this MP when his party, NDC, and the President tagged the previous government as ‘insensitive’ due to the very same reason? What about the President himself? Well he had the opportunity to talk about it when a delegation of chiefs and elders of the Anlo Traditional Area paid a courtesy call on him. The president said “Government has no intention to cause pain to Ghanaians,…increase in prices of petroleum products stemmed out of economic circumstances.” According to the President the government has inherited an economy with a 15% budget deficit, and that the records also show the previous government was spending more than it collected. The bottom-line is this: we need to ‘shore-up’ the revenue base of the country and one sure way to do that is to ask Ghanaians to pay for what we consume. That is the fact and also the truth. But to them it is only the NDC that can ask this of Ghanaians; any other government that does the same thing is ‘insensitive’ and against the ‘ordinary Ghanaian’ on the street. Why has the President joined in this ‘choir’ of hypocrites and singing from the same hymn sheet? Can the president tell us the last time any Ghanaian government (CPP, PP, PNP, PNDC, NDC, NPP) spent LESS than it collected in revenue?? So when he talks about the previous government spending more than it collected, what exactly is he trying to do??

But there’s more to this price increases than the reasons given so far. What the government is not telling us is that this is just one small part of the ‘conditionalities’ that the IMF has attached to its economic assistance to Ghana. Just when I thought Ghana had weaned itself off the Bretton Woods institutions here come the NDC to ‘’unwind’ all the gains that have been made under the NPP in this regard. I am no Professor in Economics so let’s listen to one from the University of Ghana. Ghanweb, on June 9 2009, reported one Economics Professor as saying that “..the government, in its determination to secure over a one billion dollar facility from the IMF to support its budget and to shore up the cedi, has SUCCUMBED to the dictates of the IMF.” (emphasis mine).To this professor, this is a “..step backwards in our development agenda after the nation had successfully entered the capital market where issues of conditional ties would have become history.” So folks let’s brace ourselves up for increases in utilities and in other sectors of the economy!

Here are some other reasons for the increases which the NDC government is not telling us: According to Bright Simons of IMANI Ghana (a policy Think-Tank), the increases have become necessary for two reasons. One, the government has no money to use on subsidies (I think we all know that already) and two, “...there is a supply crunch since we are now importing on LESS CONCESSIONARY terms from Nigeria but more on UNCONCESSIONARY from Europe and the Middle East. Are we really importing the bulk of our petroleum from Europe and the Middle East? And only a NEGLIGIBLE percentage from Nigeria on concessionary terms?? Why?

Does anybody remember the ‘noise’ that was made about the Sahara Oil deal? Here we have a new government (NPP) faced with a potential fuel shortage which was going to cripple the economy. The government jumps into action and manages to secure a concessionary contract with an Oil and Gas company to lift oil to Ghana. One would have thought that was what the people expected from a responsible government but NO, in Ghana it all depends on “where you belong to” and the “colours you wear” The Opposition jumped on this and decided that “who” the oil was coming from was more important than “where” it was going! I remember then minority leader Hon. Alban Bagbin leading the crusade to find who the real owners of Sahara Oil were. Needless to say that Sahara Oil was part of the Sahara Group of companies, one of the largest energy sector players in Africa. The Group has its headquarters in Lagos, Nigeria and information on them was very easy to find. But the NDC made sure they painted a picture of malfeasance to the Ghanaian public, and succeeded in ‘demonizing; both the NPP and Sahara. This same Sahara Group has already invested over $50M in constructing state-of-the-art storage facilities for bulk storage of refined petroleum products in the country. The Group is also ready to commit about $260M in investments into oil production and construction of filling stations. This is the company that Hon. Alban Bagbin and the NDC didn’t think was ‘clean’ enough to lift oil to Ghana. I hear because of the NDC’s ‘history’ with Sahara, they are unable to go to them (Sahara) to ask for assistance in our time of need. I am told also that we tried Libya but there are some operational and technical difficulties and so we ended up having to pay for refined oil on the high seas. That is very expensive. I need the NDC to refute this for it does not make sense to me. From the forgoing I believe we can all see that the NDC was left with no other choice than to pass on the cost to consumers.

More seriously, if Bright Simons from IMANI is to be believed then wouldn’t that be a bit different from what the president reported to us when he got back from Abuja? No? O, the President has actually secured a deal which would increase Nigeria’s supply to Ghana to between 60,000 and 65,000 barrels a day? That should be good news, right? But hold on for a minute as we analyze the broader picture. This Atta Mills-Nigeria deal was reportedly secured on June 19, 2009 right? On June 26, 2009 it was reported that the Nigerian government had admitted on June 24, 2009 that “..it had no more crude for its refineries to process for local consumption. Consequently the Warri and Port Harcourt refineries have been shut down. The Kaduna refinery has no crude to process because the Warri plant, which feeds it, is shut down due to damages to major pipelines.” The report continued by stating that the ‘reserved stock would be exhausted in the next 15 days.’ In light of this new development what happens to the deal that the President struck with Nigeria? Surely it is going to have an effect on us, unless we want to believe that Nigeria would ‘sacrifice’ the needs of their own people for the people of Ghana. These are challenging times for the NDC and Ghana, and I would expect them to expend their energies brainstorming to set our economy back on track!!

To add insult to injury is this report about ‘massive’ smuggling of petroleum products across the border to Togo. Somebody commented on Ghanaweb that the smuggling is ‘capitalism’ and that the people in the area learned from the previous government. This individual (name withheld) argued that by buying at a low price and going over the border to sell at a higher price, they are making profit and that is what capitalism is all about. This individual is from the area but that notwithstanding I expected something better from him. But if we are to follow his argument then it means the government would have to set the prices even higher so as to eliminate the ‘profit margin’ or ‘incentive’ that the current prices present. As a matter of urgency the government should deploy a taskforce along the border to curb the despicable and unpatriotic activities of the smugglers. The CJA, like Akwesi Pratt, for the most part has been more talk and less action; answers but no solutions. On this issue I think the NDC can look at some of the options the CJA has suggested: “..diplomatic initiatives aimed at purchasing crude oil from friendly nations at more affordable prices and under more favourable terms; cutting down on government expenditure on fuel; and hedging.” Akwesi Pratt’s ‘solution’ is for the “...government to realign its foreign policy, under the current circumstances, such that it can attract more affordable petroleum products from Latin America and the Persian Gulf instead of pushing prices upwards.” On this point I would say why don’t Rawlings go to Hugo Chavez of Venezuela and ‘beg’ for some crude oil?? They are good friends, aren’t they??? And for that matter, why not Angola or The Sudan? These guys are ‘buddies’ of Rawlings and the NDC, right? I have no problem with hedging except that it is a risky enterprise. We have to be ready and prepared for any eventuality if we decide to embark on hedging. Last year, at the height of the unprecedented record-high crude oil prices, an airline company in the U.S. reaped the benefits of hedging for a couple of months whilst its competitors were reeling under the mountain of the ever-increasing world crude prices. But that was only to be short-lived as crude oil prices begun to fall. The prices fell below their break-even point and well below what they had anticipated with against the hedging. They ran into millions of dollars in losses; and therein lies the danger with hedging.

To conclude I would suggest that we contact the Sahara Group and see what they can come up with. We should also explore all diplomatic avenues open to us. The experts should study the market well and explore the possibility of hedging but for limited periods. Smuggling, as I have already stated, should be tackled and we should allow the National Petroleum Authority to set market-rate prices for full-cost recovery.

Written and submitted on June 3, 2009

Columnist: Opare-Asamoa, Yaw