Post on 05-Sep-2020
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
Natural Resource Funds
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
Natural Resource Funds
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
Natural Resource Funds5 January 2013
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
Natural Resource Funds6 January 2013
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
Natural Resource Funds7 January 2013
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
Natural Resource Funds8 January 2013
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
Natural Resource Funds9 January 2013
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
Natural Resource Funds10 January 2013
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
Natural Resource Funds11 January 2013
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
Natural Resource Funds12 January 2013
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
Natural Resource Funds13 January 2013
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.
17.PRMActArticle61http://ghanaoilwatch.org/images/laws/ petroluem-revenue-management-act815-2011-.pdfp.32.
18.http://www.mofep.gov.gh/sites/default/files/reports/ Petroleum_Annual_Report_2012_.pdfp.25.
19.PRMActArticle61http://ghanaoilwatch.org/images/laws/ petroluem-revenue-management-act815-2011-.pdfp.32.
Endnotes