Dr. Theo Acheamong, an Energy Economist and Political Economic Analyst, has suggested that, contrary to collapsing the Ghana Heritage Fund (GHF), changes should instead be made to the quality of investment instrument accrued into the Fund.

Particularly, with the GHF, the objective is to serve as an endowment to support the development of future generations. To achieve this, the Fund seeks to preserve and enhance the real purchasing power of the fund over the long term.

However, the returns accrued on allocations made into the Fund, over the years has been marginal, as it is held in investments such as U.S. treasury bonds which accrue interests as low as 1%-2% relative to the higher rates of borrowing by the government. This has led some to question the economic rationale behind allocation of funds to the GSF.

In a public lecture organized by the Public Interest Accountability Commission (PIAC) today, March 23, 2022, dubbed “Ten Years of the Management and Use of Petroleum Revenues in Ghana: The Way Forward,” Dr Theo Acheampong, said:

“…There is no debate as to whether we need to keep some of the money aside for future generations, and we say, we want to keep only a small portion: The debate really has been on the quality of the investment that we are making with those monies, where in the ten years as you can see, the returns in for example, the Heritage Fund is 1% whereas returns from the stock market, etc. are averaging 15%-20%.

“So, I think the debate should really be, how do we get better quality instrument, to get better quality return on those investments and leave off those returns while we build up that Fund. Because you are already spending 70% plus 21%, almost 91% of that on your budget anyway, and then of course we are also going to borrow and even when we borrow, we have big question marks on the quality of the investments that we’re making on those funds.”
Dr. Theo Acheampong

Change Quality of Investment Instrument for GHF

Based on the provisions of the Petroleum Revenue Management (PRMA) Act, Act 2011 (ACT815), petroleum receipts from commercial oil production are allocated to Annual Budget Funding Amount (ABFA), Ghana Stabilization Fund (GSF) and the Ghana Heritage Fund (GSF) at specified allocations of 70%, 21% and 9% respectively.

Out of an estimated $31.2 billion generated from commercial oil production in the last ten years, Ghana has accrued $6.5 billion between 2011 and 2020. Over the years, an estimated $4.6 billion has been allocated to the ABFA; the GSF received $1.39 billion; and the GHF received $586 million.

The Energy Economist emphasized that, “We keep the Heritage Fund as [it] is, but let’s change that quality of the investment instrument,” adding that this could help the country “get better returns on it”. Effectively, he said this does not necessarily require “keeping money in the U.S. treasury by buying treasury bonds”.

However, he encouraged “investing locally but find a way of ring fencing them so that the politicians don’t end up taking that same money by the time we will be hear 10-15 years and there will be nothing to write home about,” Dr. Acheampong said.

Sharing a “contrary opinion”, Dr. Kwame Baah-Nuakoh, the General Manager, Sustainability and Stakeholder Relations of the Ghana National Petroleum Corporation (GNPC), said this was founded on the need to save for the future generation, but the country is also “borrowing for the same future generation”. He added that “… if you’re borrowing at a higher rate than you’re saving, you’re actually leaving them with debt.

“So, we can do the economics around it and ask ourselves whether devoid of sentiments, we are not losing economic value; lending money to the US. Because, when you buy US treasury bills that’s what you’re doing. You’re lending money to the US and then going around the world looking for money at a higher rate.”
Dr. Baah-Nuakoh

Dr. Baah-Nuakoh, reiterated that “then I think as a country we need to discuss oil revenues devoid of sentiments, the oil dollar does not give us 1 cent more than money from timber or cocoa.. so if we decide that as for oil money, simply because it will get finished, we have to waste part of it in the Heritage Fund… in my considered opinion we are wasting value…”