Original article
Enterprise development? Local content, corporate social responsibility and disjunctive linkages in Ghana’s oil and gas industry

https://doi.org/10.1016/j.exis.2019.09.003Get rights and content

Highlights

  • The government of Ghana and Multinational Oil Companies (MNC) established an enterprise development centre (EDC).

  • The EDC was established to promote Local Content Policy (LCP) and is a Corporate Social Responsibility (CSR) initiative.

  • The disjunction between LCPs and CSRs, undermined the EDC project.

  • Limited alliance building based on value co-creation led to the failure of the EDC project.

Abstract

The government of Ghana, in partnership with various Multinational Oil Companies (MNCs), implemented an enterprise development project for the oil and gas industry. The government framed the project within a context of Local Content Policy (LCP) while MNCs approached it as a Corporate Social Responsibility (CSR). Both LCP and CSR initiatives have become essential strategies deployed by stakeholders to mitigate, among other things, the enclavity that characterises natural resource extraction across Africa. A disjunction between LCPs and CSRs undermines the success of projects deployed to enhance linkages in the extractive industries. This paper examines the Enterprise Development Centre (EDC) project and argues that the divergence in conceptualisation and processes informed by LCP and CSR perspectives affected the content, strategies and impacts, and led to/contributed to the collapse of the EDC. There was a lack of understanding between stakeholders on interests and strategy, coupled with limited alliance-building based on value co-creation, which led to the failure of the EDC project. Better engagement between stakeholders is needed for such projects to engender value co-creation which is central to their successful implementation to promote positive development outcomes from the oil and gas industry.

Introduction

Sub-Saharan Africa (SSA) is a growing oil and gas hub, gaining grounds as an essential player in the global energy matrix (Ackah-Baidoo, 2012; Carmody, 2016). A significant feature of African economies, however, is the mismatch between natural resource extraction and development. The extant literature (Auty, 1994; Humphreys et al., 2007; Karl, 2007; Sachs and Warner, 1995) places emphasis on weak governance regimes, corruption, volatility of the global commodities market, weak institutions and conflicts among the major causes of the resource curse – the negative relationship between natural resource extraction and development.

Africa’s extractive industries tend to exist as enclaves disconnected from national economies (Ackah-Baidoo, 2012; Ferguson, 2005). Thus, little or no benefit trickles down to local and national economies from resources extraction (Ferguson, 2005). This disconnection between extractive industries and national economies underlies many of the resource-related conflicts that have plagued the Africa continent. Indeed, as Obi (2010) contends, the class relations and subordination of the African continent in a global political economy where minimal benefits accrue from resource extraction to African countries accounts for the resource curse. Oteng-Ababio (2018) in a study of Takoradi, Ghana’s oil city, found that indigenes expressed a feeling of disconnection from the oil and gas industry and contended that while the ‘the money is counted in Accra’ the oil is drilled near them. Whether perception or reality is that the extractive industries are de-linked, not only from national economies but also from local communities where resources are found and extracted.

Various strategies have been initiated by governments to counter the prospect of the extractive industries producing limited positive development outcomes for societies. Fast gaining relevance are Local Content Policies (LCPs) that seek to promote the use of local personnel, goods and services in the extractive industries value chain beyond the direct contribution of resource extraction in the form of revenue received by governments (Ablo, 2015, 2016, 2017, 2018; Klueh et al., 2007; Ovadia, 2016a, 2016b; Ramdoo, 2015; Tordo et al., 2013). Multinational Corporations (MNCs) also deploy Corporate Social Responsibility (CSR) initiatives to gain the needed social license – the trust of communities to minimise the risk of any social uprising that might stem from the limited trickle-down of resource benefits to society. Essentially, LCPs and CSR initiatives have become essential strategies for addressing the potential enclavity of the extractive industries and reducing the risk of conflicts while fostering linkages between resource extraction and national economies.

Since 2010, Ghana has been producing oil from its Jubilee Oil field. Between 2010 and 2018, several new oil and gas discoveries have been made offshore Ghana’s western coast (see Ablo, 2018, 2019; Graham and Ovadia, 2019; Mohan and Asante, 2015). Studies by Hilson (2014); Whitfield (2018) and Mohan and Asante (2015) highlight the failure of Ghana’s resource endowment to promote structural transformation of the country’s economy. Since the discovery of oil and gas, various programmes have been initiated to enhance the expertise of Ghanaians to take advantage of opportunities in the oil and gas sector (Ablo, 2015; Ablo and Overå, 2015). These policies and programmes target augmenting the skills of the people to make them employable (Ablo, 2012, 2018), some focus particularly on oil and gas management while a few of them provide technical training (Darkwah, 2013). The existing evidence (see Ablo, 2012; Ablo and Overå, 2015; Darkwah, 2013; Overå, 2017) indicates that several of the training institutions and programs exist to cash in on the high expectation of Ghanaians about the opportunities that the oil and gas discovery brings.

This paper deploys political settlement perspectives to examine the government of Ghana flagship program, the Enterprise Development Centre (EDC), a five-year project established to enhance the capacity of Ghanaian SMEs in the oil and gas industry. Three years after the lunch of the EDC, it closed with limited success in promoting SMEs’ participation in the oil and gas industry. With data produced through interviews, observations, review of documents and news items and an analysis anchored on political settlement framework, I argue that the EDC’s limited impacts and closure are an outcome of the disjunction between CSR and LCPs’ perspectives that guided its design and implementation. Driven by the desire to appeal to voters, the ruling government implemented the EDC project without any proper consultation on nature, scope and form that an enterprise development project should take. On their part, the Jubilee Partners, while arguing that the EDC did not address their needs, bought into the project primarily to fulfil their CSR requirements. The implementation of future capacity development projects should be preceded by extensive stakeholder engagement to ensure that they meet industry needs and are sustainable. The rest of the paper focuses on the political settlement framework, CSR, LCPs, data collection and discussion of the findings.

Section snippets

The political settlement of natural resource governance

Political settlement theory focuses on the dynamics of power between different actors and how that impacts the performance of an organisation or a nation (Di John and Putzel, 2009; Khan, 2017; Mohan and Asante, 2015; Whitfield, 2011). Many economic and political sciences discourses on the outcome of natural resource extraction in developing countries point to the role of institutions (Humphreys et al., 2007; Kolstad, 2009; Mehlum et al., 2006; Sachs and Warner, 1995) but are unable to clearly

Corporate social responsibility (CSR) and Africa’s extractive industries

Corporate social responsibility (CSR) has become integral to most businesses’ practices. CSR is, however, a difficult concept to define due to the variations in its underlying meaning, the issues it addresses, and the approaches adopted by companies. CSR is seen as ‘the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’ (Holme

Local content and local participation in the extractive industries

Local content policies (LCPs) promote the broad-based social and economic development of countries through local participation. Since it first emerged in the North Sea in the 1970s (Tordo et al., 2013), LCPs currently implemented by over 90 per cent of natural resource-dependent economies (Dobbs et al., 2013). The two leading oil producers in Africa, Angola and Nigeria in 2002 and 2010 respectively implemented LCPs although they have been producing oil since the mid-1950s (Ovadia, 2014).

Data collection

Fieldwork was done in Accra and Takoradi first in 2013 with follow-ups in 2015, 2016 and 2017. A two-level analysis was done to explore the political settlement of design, content and outcomes of Ghana’s EDC. The first level of study focused on the processes (what, how and why) relating to the establishment of the EDC. The second level of analysis centres on the outcomes (what, why) of the EDC project in terms enhancing the capacity of Ghanaian SMEs and linking them with relevant actors in the

An overview of the EDC project

In 2013, the government of Ghana and the Jubilee Partners (which at the time included Tullow Ghana, Anadarko, Kosmos Energy, Petro SA and Ghana National Petroleum Corporation (GNPC)) established an Enterprise Development Centre (EDC) at Takoradi to enhance the capacity of Ghanaian SMEs so that they could meet the standards of the oil and gas industry. The EDC was a US$ 5 million project funded by the Jubilee Partners for an initial five-year period from 2013 to 2018 (Ablo, 2015). By the end of

The political settlement of enterprise development for Ghana’s oil and gas industry: A divergence of CSRs and LCPs

The growing significance of LCPs in Africa’s extractive industries is an outcome of the increasing need to foster linkages between natural resource extraction and national economies. The potential for (and often cases of) natural resources extraction to occur in enclaves (Ackah-Baidoo, 2012; Ferguson, 2005) delinked from the rest of society is a significant factor for the increasing significance of LCPs. Substantial research on Africa’s extractive industries also showed a correlation between

Conclusion

African governments have over the years experimented with various models and strategies, especially those inspired by the IMF and the World Bank, to ensure that natural resources benefit societies. LCPs provide an essential strategy for fostering positive synergies between the extractive industries and national economies. For corporations, CSR projects have become vital tools in ensuring that companies focus not only on delivering profit to shareholders but also on promoting the development of

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