FACTBOX-Key political risks to watch in Ghana


Ghana joined the club of oil-producing nations in December and is getting used to its new status as a low-middle-income country coveted by investors and set to enjoy one of the world’s fastest growth rates this year.

But with an election looming, questions remain over how well it can use the oil money and manage the high expectations that creates. High global food and fuel prices are stirring new concerns about inflation.

Here are some of the risk factors ahead:


Discoveries in the Jubilee offshore oil field mean UK-listed operator Tullow Oil Plc is now talking of a possible two billion barrels of reserves under the Atlantic, Reuters reports.

Aside from the state-owned Ghana National Petroleum Corporation (GNPC), Tullow’s major players in Jubilee are U.S. producer Anadarko Petroleum and U.S. public energy firm Kosmos.

Ghana is targeting output of 250,000 bpd by 2013, putting it among the world’s top 50 producers. However, the partners say they will not hit plateau production of 120,000 bpd until next year due to technical problems and some wells underperforming.

In March, GNPC said it had ended its bid to buy the 23.49 percent stake in Jubilee held by Kosmos after months of bitter wrangling. Backed by private equity firms Blackstone Group (BX.N) and Warburg Pincus , Kosmos in May this year raised more than expected capital through an IPO.

Tullow has increased its stakes in Jubilee to 36.5 percent and the West Cape Three Points license to 26.4 percent by acquiring the Ghana share of minority holder E.O Group for $305 million.

What to watch:
– Governance. After months of delay, Ghana finally passed an oil revenue management bill and related legislation setting out “local content”, the level of obligatory Ghanaian participation in the sector. There is keen investor interest in how these rules will be applied on the ground.


In a revised data released in mid-October, the statistical office said Ghana’s economy expanded by 16.4 percent to the second quarter of 2011 mainly on oil production.

The government also lowered slightly its projected growth for 2011 to 13.6 percent from the 14.4 percent programmed in revised budget estimates approved by Parliament in July. This is broadly in line with an IMF forecast of 13 percent for the year.

If used properly, oil is a potential game-changer, helping Ghana to complete its transformation from an aid-reliant economy to one on a par with mid-income nations like Egypt or Iran.

Buoyant commodities prices are expected to provide a cushion to the economy and Ghana is determined the oil rush will not damage its gold and cocoa sectors.

Ghana’s cocoa purchases hit 1 million tonnes last year, a year earlier than targeted, due to good weather and improved farming techniques.

However, an IMF mission to Ghana warned in late October that the current progress in the economy could be derailed by an increasing public sector wage bill and high government spending in the approach to elections next year.

What to watch:
– Inflation. With high global commodity prices combining with growth in domestic demand, the IMF says inflation pressures are now on the up but it says the government’s end of year projection of 9 percent could be achieved.

Consumer inflation which rose the first time in six months to 8.41 percent in August from 8.39 percent in July. It held stead at 8.40 percent in September.
– The cedi. The local unit maintained its strength against the dollar last week on the back of regular central bank intervention. This followed losses traders blamed on risk aversion in emerging markets. Traders say the cedi could make further gains if central bank interventions are sustained.
– Interest rates. The Bank of Ghana left its policy interest rate steady for a second time at 12.5 percent on Oct 19. The hold was highly anticipated as some now see a broadly neutral outlook for the rate in months to come.


Amid IMF warnings to Ghana to control spending ahead of elections next year, the government will spend an additional 1.46 billion cedis this year, following the approval by parliament of a supplementary budget in July.

The government says the extra spending was necessary to build infrastructure and social projects to create jobs.

What to watch:
— Finance Minister Kwabena Duffuor is expected to present the 2012 budget and the government’s financial policy statement to Parliament on Nov. 16. With elections coming up, the government will be under pressure to both high public expectations as well as heed warnings on expenditure.
— Ghana seeks new funds. Ghana is still planning to launch a delayed $500-700 million Eurobond this year. The Bank of Ghana has indicated it would auction another 5-year note in December to raise capital for infrastructure projects.
— Chinese cash. President John Atta Mills secured a $13 billion financing package last year that will be drawn on as projects require funding. Parliament has approved a $3 billion loan from the China Development Bank for infrastructure development, including the construction of pipelines and plant to process gas from the offshore Jubilee field. The government says it plans to seek approval for another $6 billion from China Eximbank.


By African standards, Ghana has a good name on governance. In corruption watchdog Transparency International’s rankings, only Botswana, Mauritius, Cape Verde, South Africa and Namibia were seen to be tougher against graft in sub-Saharan Africa.

Yet the wrangling over the Kosmos stake in the Jubilee field unsettled some investors. Standard & Poor’s cited concerns over public finances and oil sector regulation in its decision to downgrade Ghana’s sovereign rating to “B” from “B+”, while others said such concerns were overdone.

Portfolio investors focus on the country’s debut $750 million Eurobond.

What to watch:

The performance of the local stock exchange. How will the arrival of oil revenues and oil-driven growth affect the bourse as oil firms such as Tullow began trading?

Taxes on miners. The IMF has recommended that Ghana adopt policies to earn more revenue from the current attractive gold prices through additional taxes.


Ghana is one of the more stable nations in the region, with a solid record of power changing hands through the ballot box.

The ruling National Democratic Congress overwhelmingly endorsed Mills as a second-term candidate to contest elections next year. However, Ghanaians’ main gripe with his administration is that economic policy has failed to live up to promises to raise living standards and tackle unemployment.

What to watch:
— Mills’ ability to reunite the ruling party. Mills defeated Nana Konadu Agyemang-Rawlings, wife of former leader Jerry Rawlings, to secure party ticket. But their support will be a strong factor in his chances against the main opposition candidate Nana Akufo-Addo in next year’s elections.
— Discontent over oil windfall? The government has sought to contain expectations among some Ghanaians of quick riches, but some disenchantment is likely. Watch out also for local anger where fishing rights have been curtailed close to the oil deposits, and claims by some chiefs in coastal areas that their communities deserve a greater chunk of the offshore oil