Saturday, June 19, 2010
Kosmos, Forbes Magazine, and the Scramble for Ghana’s Oil
The recent report by the right-wing US-based Forbes magazine that Ghana was the 9th “worst-managed” economy in the world is yet another reminder of the insidious forces at work against Ghana as the scramble for the country’s oil intensifies and big-business enlists the services of big-media to do what they do best: Demean and conquer.
One need only connect the dots for a number of seemingly unconnected events to see a pattern emerge of a conspiracy by foreign corporate interests to do Ghana in over its oil. For years, the US media and successive US governments have been among the loudest cheerleaders for Ghana’s socio-economic accomplishments, but all that seemed to have changed recently when the Ghanaian government dared challenge the decision by Texas-based Kosmos to sell its shares in Ghana’s Jubilee oil fields to fellow American company Exxon without the fiduciary consent of the Ghanaian government, the custodian of the nation’s natural resources. Kosmos’ intended sale was announced on October 12, 2009, a day after China’s National Offshore Oil Company’s interest in Jubilee was made public. Thus, overnight, Ghana found itself in the middle of the new scramble for Africa.
A June 2008 article in the Foreign Policy Magazine of the American Council on Foreign Relations had cast this scramble as “a race between China and the United States to secure [Africa’s] oil supplies”. Companies like Kosmos and Exxon represent the poisonous arrowheads of this new scramble.
As the Ghanaian government pressed its case against the sale, Kosmos and Exxon began playing the role of victim in the US media. On February 18, 2010, The Wall Street Journal, not coincidentally, published an editorial titled “Why Africa is Poor - Ghana beats up on its biggest foreign investors”. (Note the word “biggest” – not just any foreign investor). Sadly, the gullible Ghanaian media eagerly propagated this planted “editorial” as if it was gospel, and some local politicians even quoted it with relish in Parliament as proof positive of an economy in distress. (Exxon actually took a letter it had received from the Ghanaian government to Will Connors of The Wall Street Journal to plead for that scurrilous editorial, which of course was written entirely from Exxon-Kosmos’ view of events).
Surely, every country has the right and duty to protect its national interests, as the United States, for example, made abundantly clear in 2005 when it scuttled a proposed Chinese cash purchase of US oil company Unocal. In the end, Unocal, a private company, was forced by the US government to sell to a fellow American company for a combination of stocks and cash which was US$1.5 billion less than what the Chinese were willing to pay. US national interests won the day, free markets be damned! But when a small country like Ghana seeks to protect its national interest also, even in a less draconian fashion, the American big business-big-media mafia promptly embarks on a campaign of calumny and defamation to facilitate the easy appropriation of the country’s oil by the likes of Kosmos and Exxon. Not coincidentally (again), The Wall Street Journal’s February editorial was followed on March 26, 2010 by a story in another right-wing paper, The Washington Times, which got an “Africa scholar at the New York-based National Committee on American Foreign Policy” to say that “Ghana's recent actions toward foreign investors is ‘very worrisome,’ echoing what several other businessmen and scholars have said." The story continues: "He described the Kosmos case as ‘the most egregious,’ but not the only one.” What could be more egregious than a government forcing a private company to sell for less than what it would have received on the open market? And now along comes Forbes, June 9, 2010, in what appears to be a well-planned attack on mostly foreign governments that it considers to be unfriendly to US economic interests (Nicaragua, Venezuela, Zimbabwe, and, on the basis of Kosmos at least, Ghana; war-ravaged Liberia, whose reconstruction has been helped with Ghanaian technical assistance and money, comes one spot ahead of Ghana on Forbes’ list of infamy).
In the case of Ghana, the statistics used by Forbes were as misleading as they were fraudulent.The claim that Ghana has a trade deficit of US$3 billion is a case in point. As of the first quarter of 2010, Ghana’s trade deficit, according to the Bank of Ghana, was US$487 million, which, when annualized, would be about US$2 billion for 2010 – roughly the same as the US$2.21 billion for 2009. Typically, such deficits must be related to the size of the economy to have any policy meaning. In the first quarter of 2008, the trade-deficit-GDP ratio was 27.8%, falling to 17.2% in the first quarter of 2009, and then to 10.9% by the first quarter of 2010. Is this what Forbes calls mismanagement?
The magazine also claims that Ghana had an external debt of US$4.9 billion and was “struggling to pay bills”. In fact, the external debt, according to the Bank of Ghana, was slightly higher in the first quarter of 2010: US$5,438.77 million, or 29.7% of GDP. Most has gone into infrastructure development, espcially electricity and roads – a wise investment by any sensible measure. The combined public debt (domestic and external) was US$10,506.15 million (or 57.4% of GDP), better than the EU maximum of 60%, which many “better managed” economies have breeched much to their distress. Nor is it true that Ghana is struggling to pay its bills. In the first quarter of 2010, the servicing of Ghana’s debt accounted for 0.4% of GDP, a slight improvement over the corresponding period’s figure of 0.5% in 2009. This was mainly due to the stabilization of the cedi and its eventual appreciation against the US dollar, which means that government requires less cedis to pay down its debt. This is good economic management by any standard.
The article also claims that per capita GDP (or national economic output divided across the population) “fell 9% last year to $621.” But short-term dollar-denominated GDP as reported by Forbes reflects more of the variations in exchange rates than actual changes in domestic output or living conditions.
A halving of the cedi-dollar exchange rate by administrative fiat, for example, would double Ghana’s GDP on paper overnight without a corresponding increase in output or welfare; a doubling would have the opposite effect of reducing GDP statistically, but not in fact.
And this is in fact what has happened. In 2007, the cedi depreciated by only 2.1% against the US dollar; in 2008, as government spending increased in part to deal with the global financial meltdown that began in the US, the rate of depreciation shot up to 12.2%, and then to 25.2% in 2009, leading to a fall in dollar-based GDP in both years, although cedi-denominated GDP grew by 7.3% and 4.7% in each respective year. With a population growth of 2.0% and economic growth rate of 4.7% in 2009, real per capita GDP (that is, the actual goods and services available on average to each Ghanaian) increased by nearly 3.0%, contrary to Forbes’ dubious doomsday statistical decline of 9.0%.
And so as more oil is discovered, and the protection of the national interest becomes a moral imperative, we can expect more of such mercenary journalism from the likes of Forbes and The Wall Street Journal. Ghanaian journalists have a professional and moral duty to expose them at every opportunity.
By Nii Moi Thompson
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