natural resource funds - columbia...

Natural Resource Funds

A JOINT CENTER OF COLUMBIA LAW SCHOOL AND THE EARTH INST ITUTE AT COLUMBIA UNIVERSITY

VALE COLUMBIA CENTERON SUSTAINABLE INTERNATIONAL INVESTMENT

GhanaHolding, Heritage and Stabilization Funds

Ghana

Accra

GHANA


Santiago Compliance

Index

Not yet rated Not yet rated 47 / 100

Resource Governance Index Natural Resource

Fund Score

Truman Sovereign Wealth Fund Scoreboard

2 January 2013

Market Value

Ghana Stabilization Fund $54.9 million

Ghana Heritage Fund $14.4 million

Synopsis

Fund Highlights• Ghana’spetroleumrevenueisfirstheldinanintermediaryPetroleumHoldingFundwhereitisthenallocatedtotheGhanaNationalPetroleumCorporation,theAnnualBudgetFundingAmountandGhana’stwosovereignwealthfunds,collectivelyknownastheGhanaPetroleumFunds:

• TheGhanaStabilizationFund • TheGhanaHeritageFund

• BothoftheGhanaPetroleumFundsareheldseparatelyfromGhana’sConsolidatedFund,whichisfundedbytheAnnualBudgetFundingAmountandservesasthesource ofthenationalbudget.

• TheFundsareoverseenbyamulti-stakeholderPublic InterestandAccountabilityCommitteethatpromotes compliancewithGhana’soilrevenuemanagementlaws.

Good Governance Fundamentals

ClearDepositRules yes

ClearWithdrawalRules yes

ClearInvestmentRules yes

Transparent yes

PubliclyAvailableAudits yes

EffectiveOversight yes

GHANA


Constitution of the Republic of Ghana (last amended in 1996).

Bank of Ghana Act, 2002 (Act 612) creates the Bank of Ghana.

Public Procurement Act, 2003 (Act 663) creates operational rules to foster accountability.

Ghana Revenue Authority Act, 2009 (Act 791) creates the Ghana Revenue Authority.

Petroleum Revenue Management Act, 2011 (Act 815) creates the Funds and the Public Interest and Accountability Committee.

1993 2002 2003 2009 2011

TIMELINE

3 January 2013

Timeline and Fund Objectives

Fund Inception• ThePetroleumHoldingFund,theGhanaHeritageFund andtheGhanaStabilizationFundwereestablishedunderthePetroleum Revenue Management Act of 2011.1

• TheActanticipatesthatwhenGhana’snaturalresources areeventuallydepleted,thetwosovereignwealthfundswillceasetoexistandallremainingassetswilltransfer toanewfund,theGhanaPetroleumWealthFund.2

Fund Objectives• TheGhanaStabilizationFund’saimistomitigatethe negativeeffectsofoilrevenuevolatilityonthenational

budget,andsustainpublicexpenditurecapacityinthe unanticipatedeventofarevenueshortfall.3

• TheGhanaHeritageFund’saimistosaveoilrevenuesforfuturegenerationsofGhanaians.4

• ThePetroleumRevenueManagementActensuresthattogetherthefundsprovide,“forthecollection,allocationandmanagementofpetroleumrevenueinaresponsible,transparent,accountableandsustainablemannerforthebenefitofthecitizensofGhanainaccordancewithArticle36oftheConstitution.”5

GHANA

Natural Resource Funds4 January 2013

OPERATIONS

ObjectivesareClear

RuleforHowMuch CanbeWithdrawnin

AnyGivenYear

RuleforWhich RevenuesMustbe DepositedandWhen

Exceptionsto RulesareClarified

INVESTMENT

Useof ResourceRevenues

asCollateral

Domestic Investmentis

ExplicitlyProhibited

Investment RiskLimitations

Publicationof SpecificInvestments

MANAGEMENT

Penaltiesfor MisconductbyFundManagers&Staff

Ethical&Conflict ofInterestsStandardsforManagers&Staff

TheDetailed Responsibilities ofFundManagers

&Staff

TheRoleof Government

AgenciesinFund Management

TRANSPARENCY AND OVERSIGHT

PublicDisclosure ofIndependent ExternalAudits

PublicDisclosure ofInternal

AuditResults

Formalized Oversight Mechanism

PublicDisclosure ofRegularlyCompiled

FundReports

13/16

Eachboxrepresentsa regulatory standard essential forpromotingconsistent useofandsafeguardingresourcerevenues.Whiteboxeshighlightregulatorygapsinfundgovernance.

PresenceofRegulation

AbsenceofRegulation

Good Governance Standards and Gaps in Regulation

GoodGovernanceStandardsMet

GHANA


Operational Laws, Rules and Policies

Fund Deposit RulesAllpetroleumrevenueisinitiallycollectedanddepositedinanintermediaryPetroleumHoldingFundattheBankofGhana.6Thisisdefinedas:7

• Royalties • Profitoil • Corporateincometax • Participatinginterest • TransfersfromtheGhanaNationalPetroleum

Corporationtothegovernment • Investmentincome • Surfacerentals

Fund Withdrawal Rules• Petroleum Holding Fund • TheGhanaNationalPetroleumCompanyreceivesa

sharefromthePetroleumHoldingFundthatisupto55%of‘carriedinterest,’theshareofprofitsthatgotothestateaspart-ownerofoilproduction.

• TheFundallocatesanAnnualBudgetFundingAmounttothegovernment’sConsolidatedFundforannualbudgetspending.Theamountcannotexceed70%oftheBench-markRevenuefortheyearandmustbeapprovedbyPar-liament.BenchmarkRevenueisaseven-yearaverageofpetroleumrevenuecalculatedbytheMinistryofFinance.8 TheAnnualBudgetFundingAmountmustbeusedfordevelopment-relatedexpenditures.9

• Remainingpetroleumrevenueisthendepositedinto theGhanaHeritageFundandtheGhanaStabilizationFund.10Aminimumof30%oftheamountisdeposited intheHeritageFundandtheremainderinthe Stabilization Fund.11

• Ghana Heritage Fund • Withdrawalscanonlybemadeonceoilreservesare

depletedandbothPetroleumFunds’assetsaremergedintotheGhanaPetroleumWealthFund.Fromthatpointforward,theamountallocatedtotheAnnualBudgetFundingAmountshallnotexceedtheinterestontheGhanaPetroleumWealthFund’sinvestments.12

• ThrougharesolutionofParliament,aportionoftheaccruedinterestmaybetransferredtoanewfund establishedbyorunderthePetroleumRevenue ManagementActafteraperiodof15yearsfromtheGhanaHeritageFund’sinception.13

• Ghana Stabilization Fund • Withdrawalsmaysupportthebudgetifquarterlyoil

revenuesfailtoadequatelycover25%oftheAnnualBudgetFundingAmount.14

• Whilesuccessivequarterlyshortfallsaretreateddiffer-entlybythePetroleumRevenueManagementAct,onequarter’sshortfalliscoveredbywithdrawingfromtheGhanaStabilizationFundanamountequaltothelesserofeither75%oftheestimatedshortfallforthequarter or25%oftheFundbalance.15

Ghana has strong deposit and

withdrawal rules that help prevent mismanagement

of oil revenues.

GHANA


GhanaNationalPetroleumCompany

Petroleum Holding Fund

ConsolidatedFund

(GeneralBudget)

GhanaHeritage

Fund

GhanaStabilization

Fund

Forfiscalrules,seepage5

Petroleum Revenue

Operational Laws, Rules and Policies

Flow of Funds

1.Amountthatequals upto55%ofcarried interest,theState’sshareofprofitsas part-ownerofoil production.

2.Amountthatequals upto70%ofthe BebchmarkRevenue, aseven-yearaverage ofoilrevenues.

3.Minimumof30%ofremainingrevenuesafterdepositstotheGhana National Petroleum CompanyandtheConsoli-dated Fund are made.

Fundsusedtocovershortfallsinquarterlypetroleumrevenue

4.Allremaining revenuesafter depositsinto theGhana Heritage Fund.

GHANA


Policy on in-country investmentsTheFundsmaynotinvestdirectlyin Ghanaianassets.19

EuroclearBonds

100%

Investment Laws, Rules and Policies

Investment AllocationTheFundscanbeinvestedin‘qualifyinginstruments’.16 Aqualifyinginstrumentis:

a) debtinstrumentdenominatedininternationally convertiblecurrencythatbearsinterestandisissued byaninvestmentgradesecurityorguaranteedbytheIMF,WorldBankorasovereignstatewithinvestmentgrade rating.

b) aninternationallyconvertiblecurrencydepositwith theBankforInternationalSettlements,theEuropeanCentralBank;theCentralBankofasovereignState,otherthantheRepublicofGhana,withalong-terminvestmentgraderating.

c) aderivativebasedonadebtordepositasdescribedin a)andb)andwhoseacquisitionreducesthefinancialexposuretorisksassociatedwiththoseinstruments.17

Actual InvestmentsFundsareinvestedattheEuroclearBankinAAA-rated, low-riskbonds.Specificinvestments,thecountrieswhere thefundsareheldandthecurrencytheyareheldinare, however,unknown.18

Asset Allocation

GHANA


Parliament drafted the legislation creating the Funds, and is required to approve many of the actions to manage the Funds.

The Minister of Finance is responsible for overall management of the Funds, investment strategy and transfers into and out of the Funds.

The Public Interest Accountability Committee assesses compliance with laws and submits reports to Parliament, the President and the general public via public meetings and online.

President

MinisterofFinance

Ghana Petroleum Funds(heldattheBankofGhana)

AuditorGeneral

Parliament

Public Interest and Accountability Committee

InvestmentAdvisoryCommittee

Management and Accountability

The Investment Advisory Committee advises the Ministry on how to invest the Funds.

The Funds’ day-to-day operations and internal audits are managed by the Bank of Ghana.

The Auditor-General, who is appointed by the President, performs an audit and reports to Parliament. Ghana’s Constitution prohibits the Auditor General from being under the control or direction of any person or authority.

Management and internal accountability External accountability

GHANA


Oversight and Safeguards

Oversight Mechanisms• Anoversight committee,thePublic Interest and

Accountability Committee,isempoweredbylawtomonitorand“police”Fundactivity,ensuringcompliancewiththeregulationsgoverningtheFund.Thecommitteereportsmustbepublishedandsubmittedtoparliamentandthepublic.

• Aperiodic review process of investment methodologyexiststoimprovemanagement ofinvestments.

• Financesaresubjecttoregular and comprehensive internal audits.

• ArbitrarywithdrawalsfromtheFundsarenot allowed;allspendingfrompetroleumrevenuesmust be approved by parliament.

• Fundsaremanagedseparately fromthecountry’sinternational reserves.

• Fundfinancesaresubjecttoaregular and independent external auditthatmeetsinternationalstandards.

Common Oversight Mechanisms or Safeguards Not Present in Ghana• International oversight institutions,suchasthe WorldBankortheInternationalMonetaryFund,do not routinely monitor Fund management.

• Therearenopublicly available audits or reports on theflowoffundsfromthePetroleumHoldingAccounttotheGhanaNationalPetroleumCompany.The Public Interest

and Accountability Committee (PIAC)

is an influential group that verifies

compliance with the law and suggests

ways to improve oil revenue management.

GHANA


WhenorhowoftenFundreportsarepublishedandmadepubliclyavailable yes

WhichindividualsororganizationsareresponsibleforpublishingFundreports yes

SizeoftheFund(s) yes

Depositandwithdrawalamounts yes

Returnsoninvestments yes

Detailedassetallocation–geographiclocation no

Detailedassetallocation–assetclass yes

Detailedassetallocation–specificassets no

Naturalresourcepricesandotherfiscalassumptionsusedtocalculate depositandwithdrawalamountsallowedunderfiscalrules

no

Transparency Laws, Rules and Policies

There is public disclosure of the following:

GHANA


Ministry of Finance and Economic Planning • FailedtoestimateandcertifytheBenchmarkRevenue usingtheformulaintheschedule.

• FailedtosubmitanannualreportontheFundsto Parliamentaspartoftheyearlypresentationofthe budgetstatementandeconomicpolicies.

• Failedtopublishinatleasttwostate-owned dailynewspapers.

• Failedtomakeregulationsfortheeffectiveperformance ofthePetroleumManagement Act.

• Failedtodevelopaninvestmentpolicyfortheinvestment oftheFunds.

Auditor General • FailedtosubmitauditedreporttoParliament.• FailedtopublishthereportsontheFundswithin30daysaftersubmissiontoParliament.

Bank of Ghana • FailedtosubmitareportontheFundstotheMinister andtheInvestmentAdvisoryCommitteeQuarterly.

• Failedtopublishinnewspapers.

Ghana Revenue Authority • Failedtoassessandcollectsurfacerevenues.

Parliament • FulfilledallofitsobligationsunderthePetroleum RevenueManagementAct.

Investment Advisory Committee • Obligationswerenotfulfilledbecausethecommittee wasnotformeduntilJanuary1,2012.

• FailedtosubmitreportsontheperformanceoftheFunds totheMinisterafterreceivingquarterlyreportsfromtheBankofGhana.

• FailedtoreporttotheMinisterontheperformanceand activitiesoftheGhanaPetroleumFunds.

Public Interest and Accountability Committee • FulfilledallofitsobligationsunderthePetroleum RevenueManagementAct.

Implementation of Laws, Rules and Policies(asofJanuary2013)

PublicInterestandAccountabilityCommittee(2012) Report on Petroleum Revenue Management for 2011: Annual Report.PIAC.Onlineat:http://www.piacghana.org/

GHANA


Constitution of the Republic of Ghana

http://www.unhcr.org/refworld/country,, NATLEGBOD,,GHA,,3ae6b5850,0.html

Petroleum Revenue Management Act Act 815

http://ghanaoilwatch.org/images/laws/ petroluem-revenue-management-act815-2011-.pdf

Bank of Ghana Act Act 612

http://www.bog.gov.gh/privatecontent/IDPS/banking%20and%20financial%20laws%20of%20ghana%201998%20-%202006.pdf

Public Procurement Act Act 63

http://www.ppbghana.org/documents/ Public%20Procurement%20Ac%202003 %20Act%20663.pdf

Ghana Revenue Authority Act Act 795

http://www.gra.gov.gh/docs/info/gra_act.pdf

Annex: ListofApplicableLaws

GHANA


1. http://ghanaoilwatch.org/images/laws/petroluem-revenue- management-act815-2011-.pdf

2. PRMAct,2011,Article20(1)and(2)http://ghanaoilwatch.org/images/laws/petroluem-revenue-management- act815-2011-.pdfp.11.

3. PRMAct,2011,Article9(2)http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdfp.7.

4. PRMAct,2011,Article10http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdfp.8.

5. http://ghanaoilwatch.org/images/laws/petroluem-revenue- management-act815-2011-.pdf

6. PRMAct,2011,Article2(1)-(2)andArticle3(1) http://ghanaoilwatch.org/images/laws/petroluem-revenue- management-act815-2011-.pdfp.5.

7. PRMAct,2011,Article61http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdfp.31.

8. PRMAct,2011,Article17and18http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdfp.10-11.

9. PRMAct,2011,Article21http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdf;p.11-12.

10.PRMAct,2011,Article17http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdfp.8.

11.PRMAct,2011,Article23(1)(b)http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdfp.13.

12.PRMAct,2011,Articles13and20http://ghanaoilwatch.org/images/laws/petroluem-revenue-management-act815-2011-.pdfp.9,11.

13.PRMAct,2011,Article10(4)http://ghanaoilwatch.org/images/ laws/petroluem-revenue-management-act815-2011-.pdfp.8.

14.PRMAct,2011,Article12http://ghanaoilwatch.org/images/ laws/petroluem-revenue-management-act815-2011-.pdfp.8.

15.PRMAct,2011,Article12(2)http://ghanaoilwatch.org/images/ laws/petroluem-revenue-management-act815-2011-.pdfp.8.

16.PRMActArticle27http://ghanaoilwatch.org/images/laws/ petroluem-revenue-management-act815-2011-.pdfp.15.


18.http://www.mofep.gov.gh/sites/default/files/reports/ Petroleum_Annual_Report_2012_.pdfp.25.


Endnotes

natural resource funds - columbia...

Documents