Adnan Adams Mohammed
Natural Resource Governance experts have bemoaned the current piece meal approach successive governments have used to draft, negotiate, sign and implement all three Resource Backed Loans for the last 14 years.
The experts believed that, by now any serious country would have a policy to guide how its resources are used as a guarantee for a key governance funding such as infrastructural investment.
Ghana since 2007, under the regime of President J.A. Kuffour, contracted the first RBLs (an exim facility from China) which was used for the construction of the Bui dam. Subsequently, The Prof Atta Mills/John Mahama government in 2011 also started the China Development Bank RBLs facility used for the Ghana Gas project by Sinopec and the third one is the Ghana Bauxite – Sinohydro facility. In all, about US$5.6 billion value of RBLs have been signed with a policy guiding the process.
“It is really worrying to hear from a government official that, the country has no policy on RBLs after the third contract”, Daniel Gbondo, Mining Policy Advisor at the Ministry of Mines and Mineral Resources, Sierra Leone said during a panel discussion at the NRGI/ACEP Public Dialogue on Resource Backed Loans in Ghana in Accra, last week.
The Mining Policy Advisor called on his Ghanaian counterpart in the West African sub-region to as a matter of urgency put together a policy framework to give holistic direction on the engagement, negotiation and expenditure process on RBLs.
Dr Steve Manteaw, a giant natural resource governance expert, although not as much worried with the absence of a policy document on RBLs, but called on the government machinery to swiftly consider getting one.
Several resource-rich developing countries have increasingly in the last few decades sought to leverage their resource endowments to finance development. Through these arrangements, governments have secured funding in exchange for or guaranteed by future streams of resource income. Oil and minerals are the most common resources often relied upon in such transactions, commonly referred to as resource-backed loans (RBLs).
In a 2020 NRGI global research of 52 resource-backed loans (RBLs) between 2004 and 2018, 30 RBLs were entered into by Sub-Saharan African (SSA) countries and another 22 in Latin America using mainly oil and mineral resources. Sub-Sahara African countries that have gone down this path include the Republic of Congo, DR Congo, Sudan, Guinea, Angola, and Ghana. Across the continent, governments have sought severally to use their abundant mineral and oil wealth to fund its massive infrastructure deficit.
Total financing for infrastructure in Africa is projected to be US$4.3trillion until 2040 with an annual forecasted investment of US$174billion.1 At country level, Ghana’s Ministry of Finance indicates in a recent assessment that Ghana’s annual infrastructure investment will need to reach US$9.3 billion by 2030 (13.9% of 2019 GDP).
In essence, Ghana’s total infrastructure investment will need to reach US$96 billion (143% of 2019 GDP) by 2040 to attain the sustainable development goals (SDGs). Other SSA country contexts indicate similar significant infrastructure financing needs.2 Given the foregoing and as part of the strategy to bridge the infrastructure gap, SSA countries have signed loan agreements in exchange for extractive commodities.