A REVIEW OF GHANA'S HERITAGE FUND UNDER THE GHANA PETROLEUM REVENUE MANAGEMENT ACT 2011 (ACT 815)

Abstract

In 2010, the government of Ghana introduced its proposals for managing petroleum revenue to parliament for consideration. The proposal was later passed into law as the Ghana Petroleum Revenue Management Act 2011 (Act 815) (PRMA). The preamble to the Act states:

“An act to provide the framework for the collection, allocation and management of petroleum revenue in a responsible transparent accountable and sustainable manner for the benefit of the citizens of Ghana in accordance with article 36 of the constitution and related matters”

Article 36 of the 1992 Constitution of the Republic of Ghana sets out the economic objectives of the state and provides particularly in Article 36(1),(2)(d)(e) and (3) as follows:

36(1)- "The State shall take all necessary action to ensure that the national economy is managed in such a manner as to maximise the rate of economic development and to secure the maximum welfare, freedom and happiness of every person in Ghana and to provide adequate means of livelihood and suitable employment and public assistance to the needy"

36(2)- "The State shall in particular, take all necessary steps to establish a sound and healthy economy whose underlying principles shall include..."

(d)"undertaking even and balanced development of all regions and every part of each region of Ghana, and, in particular improving the conditions of life in the rural areas, and generally, redressing any imbalance in development between the rural and urban areas"

(e)"the recognition that the most secure democracy is the one that assures the basic necessities of life for its people as a fundamental duty"

36(3)- "The State shall take appropriate measures to promote the development of agriculture and industry".

This article reviews the Heritage fund, an endowment fund for the benefit of future generations set up under the Petroleum Revenue Management Act to see whether it conforms with the provisions of Article 36 of the 1992 Constitution of the Republic of Ghana in the light of Article (1)(2) of the Constitution which states as follows:

"This Constitution shall be the supreme law of Ghana and any other law found t be inconsistent with any provision of this Constitution shall, to the extent of the inconsistency, be void"

The idea of a Heritage fund not being a new idea took its roots in the idea of the creation by sovereign states of Sovereign Wealth Funds, a savings mechanism which has existed till today. There are many who argue that the creation of such a fund is unnecessary whilst there exists a present need for the funds and have advanced genuine reasons in support of their argument. This article reviews the arguments on both sides and tries to answer the question on whether the Heritage fund is necessary and whether the Heritage fund could be better applied than it is being done now. This article will also seek to review whether the current legal regime regarding the heritage fund is constitutional. In other words whether it is inconsistent with the provisions of Article 36 of the Constitution. Should we heed calls from sections of the public to use the Heritage fund for the present developmental needs of the nation for the benefit of the present and future generations?

Keywords: Excess crude account, oil and gas, sweet oil, jubilee field, resource curse, integenerational equity, qualifying securities, dutch disease, heritage fund, stabilization fund, sovereign wealth fund, Nigerian sovereign wealth fund, Alaska permanent fund, Norway pension fund, fiscal policy, nonrenewable resources.