Ghana, the West African superpower is famed globally for its past with great men such as Dr. Kwame Nkrumah pioneering and leading the African dream until his brutally foreign-aided ousting from office in 1966, Kofi Annan, the UN Secretary General who brought joy and further fame to his homeland and the many talented sportsmen and women. Joy that is on the brink of extinct as a result of Chinese loans.
Outside of the above, Ghana, formerly called the Gold Coast is famed for its rich mineral God-given land. A land that oral history claimed had gold littered on the earth’s surface before the onset of colonialism and Western infiltration. The country can boast of precious minerals including gold, diamond, bauxite, and manganese, but that is not all. Cocoa, the version of Ghana’s gold that is grown and harvested by farmers at the farms has earned the country so much in revenue since its introduction in the late 19th century Gold Coast.
Discovery of the Black Gold
In 2007, Ghana under the President Kuffour announced the discovery of oil in commercial quantities. The announcement of the discovery at Cape Three Points was the final piece on the search for Black Gold that began late in the 19th century in the Tano basin in the present Western Region of the country according to the Petroleum Commission. And since 2010, the country earned $6.2 billion in revenue from oil exports as of June 2021, and in 2022, the country made a total of $1.43 billion from oil exports, an 82.4% increment from the previous year.
All these gains were expected to give the country one thing, a true path to economic independence propelled by growth and development founded on efficient management of the country’s abundant but depletable resources. That was the dream of many Ghanaians when the oil discovery was announced but 16 years since that big news, those who had placed their hope in seeing a Ghana that is truly using its resources to live the dreams of its citizens have all but been drizzled out any traces of such hopes.
Ghana, unlike its fellow oil-producing countries, has failed to make good use of its resources. Well, that could be limited as the country has colleagues in the African continent that sleep on oil resources that only benefit others but the owners[citizens]. Qatar recently hosted the world cup and many including the Ghanaians who traveled there appreciated the use of the country’s petroleum and natural gas resources. Dubai, Saudi Arabia, and others are destinations for many Ghanaians seeking petty domestic and construction jobs just to break the cycle of poverty they have been chained to in their homeland Ghana. But when you realize that most of those countries do not have gold, manganese, bauxite, cocoa, or the arable land that Ghana is blessed with but just oil, you wonder what Ghana’s real problem is.
Cheap money today, expensive price tomorrow
So after failing to manage her resources, Ghana decided to adopt another ‘resource’ which though easier to get, leads to a catastrophic end more often than not. Ghanaian leaders thought loans were the best way to fund their budgets and also finance their expensive lifestyle and political campaigns when in power while reserving the droppings from the table for the people. That has led to excessive borrowing by the country’s leaders. As of 2000, the country’s public and publicly guaranteed debt stood at $6 billion with arrears of $81 million according to the central bank. That has since ballooned to about $63 billion with $30 billion being external debt.
The country turned to China as a funding hub since 2000 and that decision had impacted the country’s efforts to secure its 17th IMF bailout. A high-powered delegation led by the Finance Minister had to travel to China to engage in bilateral talks for debt restructuring as part of the conditions to secure the US$3 billion support from the IMF. That was successfully done but opened a different chapter for discussion in the West African country.
On Tuesday, the IMF reported that Ghana risked losing some of its natural resources to China if it defaults on some of its loans. According to the IMF, the country collateralized four loans against natural resources including cocoa, bauxite, and oil. That is not all, electricity in the country has also been collateralized. At the end of 2022 according to the Bretton Woods Institute, Ghana’s collateralized loans stood at US$619 million and all is held by China.
According to the IMF, “Collateralized debt is any contracted or guaranteed debt that gives the creditor the rights over an asset or revenue stream that would allow it, if the borrower defaults on its payment obligations, to rely on the asset or revenue stream to secure repayment of the debt”.
But is it possible China will seize Ghana’s revenue streams or assets? Yes, this is very possible. In 2018, reports emerged that Zambia state electricity company Zesco was in discussion with the Asian powerhouse for the takeover of the company. The Southern African country had to take drastic measures to avoid what was called a “debt trap”. Zambia canceled US$1.6 billion of undisbursed Chinese loans and US$2 billion in total undisbursed loans from external creditors. That led to the halting of some projects in the country as it worked to avoid falling into a serious debt crisis. So in the event that the country had not acted early enough to avoid falling completely off the cliff, China would have had the right to take over some state assets or revenue-generating sources for some of the over US$6.6 billion owed to Chinese creditors.
So what actually led to Ghana’s current predicament despite the wealth and luxury of abundant natural resources and the presence of a very youthful and energetic population? Check back later on this portal for the details.