Ghana: GNPC diverts resources into unprofitable business

Posted: February 18, 2010 in Economic Reporting
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The Public Accounts Committee of Parliament yesterday lambasted the Ghana National Petroleum Company (GNPC) for diverting its scarce resources into unprofitable businesses that resulted in the company incurring huge losses in its operations during the 2003-2005 year under review.

The GNPC incurred this wrath when members of the Committee discovered huge lapses in the company’s balance sheet, when being audited by the Auditor-General during the said period stated above.

It all started when the Deputy Chairman of the Committee and Member of Parliament (MP) for Dormaa West, Kwaku Agyeman-Manu, enquired from the management of the GNPC whether they were making any profit from the numerous investments they had made in other businesses.

Mr. Andrew Badu Lartey, Director of Administration of the GNPC, answered in the negative, and told the Committee that those businesses were not making any profit, hence their inability to pay dividends to its stakeholders.

Kwabena Amankwa Asiamah, MP for Fanteakwa, became very furious with the director’s pronouncement, fuming “You have woefully failed Ghanaians.”

He told The Chronicle in an interview, that the GNPC diverted its core functions by investing into unprofitable businesses, when it had no expertise at its disposal.

“They couldn’t entrench the money trusted in them into the rig to find oil for Ghanaians. They rather ventured into non-core businesses like farms and hotels that actually did not bring any impact on their revenue. They did not have the expertise,” he noted.

The GNPC, as part of its core functions, was strategically mandated to strike oil for Ghana, but having failed on numerous occasions, in spite of available data at its disposal, decided to invest in other businesses in order to raise money and become a profitable company for the country.

But, this decision did not yield results, and has been criticised by a cross-section of the public, for lacking the capacity to become a profitable avenue for the state.

“They thought other people were making money from those companies, and decided to do so, but they failed. None of the companies they invested into brought meaningful revenue to the company. Those companies have even folded up, and the GNPC are now looking for people to buy their assets, in order to recover part of their money,” Mr. Asiamah told The Chronicle.

According to Mr. Asiamah, the decision by the GNPC to venture into those unprofitable businesses had cost the country a lot, citing only 10% of revenue to the country from the oil exploitation, instead of 45%.

He said after having gathered all the necessary data on oil prospects in the country, the GNPC should have gone ahead with its mandate, by finding oil for Ghana, but rather choose to do other things outside its core functions.

“Now they are appeasing themselves for the fact that they sold information that led to the discovery of oil in Ghana. What has that got to do for Ghanaians,” he asked, adding, “how much are we taking for what the foreigners have now? We have only 10% at stake in what they are going to exploit, whilst they take 90%. We wanted GNPC to have that money to concentrate on their core functions by striking oil for Ghanaians to enjoy a substantial stake in the oil discovery.”

Unprofitable businesses the GNPC invested in include the Prestea Sankofa Gold Mines, Mole National Park, as well as some hotels in the Northern Region.

But, in spite of all the accusations, the management of GNPC said it had managed the company to the best of its ability.

Touching on how prepared the country was in exploiting oil and gas in commercial quantities, the Deputy Minister of Energy, Mr. Kofi Buah, called for a review of the PNDC law 84, in order to strengthen the oil Legislation Instrument, which is now at Cabinet level, to safeguard the industry by encouraging more Ghanaians to get on board.

The government, on 20 January, released a draft oil and gas regulation bill for consultation, which requires oil companies to consider independent Ghanaian operators when awarding contracts, and calls for the creation of an agency to monitor oil revenue spending, according to IRIN.

“The legal and regulatory framework is absent, the policy is yet to be finalised, so contracts are hanging, nobody is monitoring, and it’s looking like a perfect setting before an oil curse strikes,” ISODEC Campaign Coordinator, Steve Manteaw, told IRIN.

Hon. Kofi Buah told the Committee that the Oil and Gas policy was looking at how to encourage Ghanaians to participate actively in the oil exploitation business, hence the delay to critically examine the issues at stake.

Oil revenue is expected to add up to US$I billion per year to the country’s economy.

Next to appear before the Committee was the Energy Commission, which the Public Accounts Committee, according to the 2005 audit report by the Auditor-General, did not find any adverse comments on their operations.

But, the Committee, however, faulted them for spending three billion old Ghana cedis (¢3bn) on rented offices, and questioned the decision that informed the Commission to do so.

It recommended a full probe into the irregularity, and bring the perpetrators to book, to serve as deterrent to others, since that huge amount of money could have been used to buy its own offices.

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