19 November 2009

Africa: Opacity Blamed for Bad Oil Deals in Africa

Montreal — Campaigners from fifty countries from around the world meeting in Montreal, Canada to strategise on pushing further the frontiers of transparency in oil, gas, and mining industries, have blamed opacity in oil and mineral licensing for the bad deals natural resource-dependent countries are often saddled with.

Addressing the meeting, Diarmid O' Sullivan of Global Witness, said opacity in licensing provides cover for rent-seeking practices of public officials, which in turn, serves as incentive to negotiate bad deals for their countries.

Diarmid O' Sullivan recalled instances where the names of three interest holders in companies bidding for oil blocks in Angola bore the same names as high-ranking officials in that country, and argued that, such are the reasons why countries that have signed on to the Extractive Industries Transparency Initiative (EITI) must ensure openness in the concession allocation processes in their natural resource sector.

Other participants cited instances from Nigeria and Equatorial Guinea to show the need for open licensing and contract disclosure. A media report of shady oil deals in Equatorial Guinea involving the son of the president of that country was brought to attention. According to the New York Times of Tuesday, November 17, Teodoro Nguema Obiang, the son of the president of Equatorial Guinea, who is also the Agriculture and Forestry Minister in his father's government has siphoned millions of dollars from the country and bought himself a $35 million villa, fleet of luxury cars, speed boats and a luxury jet in Malibu, California, at a time when majority of the country's population live in abject poverty.

The story cites a U.S. Justice Department memorandum dated September 4 2007 which affirmed that from April 2005 to April 2006, Mr. Obiang transferred at least $73 million into the United States, using shell corporations and offshore bank accounts to launder the money and ultimately buy his Malibu estate and luxury jet.

The campaigners, organized under the banner of Publish What You Pay, have been clamouring for transparency in the payment, receipt and management of extractive industries revenues since 2000. The group believes that, by ensuring public disclosure of revenue payments and receipts from natural resource extraction, citizens will be empowered to demand accountability from their governments as to how these revenues are used.

Commenting on recent claims of political harassment by friends and associates of some Ghanaian investors in Ghana's oil sector, a participant, argued: "If the licensing process in Ghana had been transparent, perhaps the need to investigate the backgrounds and how these individuals came to acquire these shares in question wouldn't have arisen". The suggestion that such inquiry will scare off future investors, was dismissed as far fetched. Rather, it was argued that investor confidence is usually bolstered by a regime of openness and due process; a regime where the incentives for rent-seeking and extortion are diminished.

A report of a study on contract secrecy released at the meeting, argues that, when contracts are publicly available, government officials have an incentive to stop negotiating bad deals with extractive industry companies. The result, the authors maintain, is better contracts, greater public trust, and more stable investment climate. The report was commissioned by Revenue Watch Institute and authored by Peter Rosenblum and Susan Maples of the Columbia Law School.

Ghana's oil licensing remains an open-door, negotiated deal type in spite of the recent discoveries, described as world class, and among the most significant in recent years.

The issue of contract transparency as a good governance principle in the natural resource sector appears to be gaining currency in global discourses on the role of the extractive sector in national economies, and it is expected to be one of the focal themes of a communique to be issued at the close of the conference.

Though, the National Democratic Congress government has expressed a commitment to openness in the process as well as the content of the contracts being entered into with international oil and gas companies, there have been no significant steps taken to demonstrate this commitment.

Ghanaians largely remain in the dark about the negotiations and maneuverings that have characterized Ghana?s oil sector since December, 2009.

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