Why the Absence of the Investment Advisory Committee is a Significant Violation of the PRMA

One of the key bodies mandated to ensure proper management of the Ghana Petroleum Funds (GPFs), the Investment Advisory Committee (IAC) has not met since 2016 raising questions about its relevance and impact on the management of the country’s oil revenue. The absence of such an important Committee appears to be giving credence to the suggestion that it is just another bureaucracy with little or no impact on the actual management of the resource revenue.
Ghana discovered oil in 2007, followed by a synthesis of optimism, cynicism and heated public discourse across the country on the management of this finite extractive resource. In the face of these realities, calls by Civil Society Organisations, Independent Policy Research Think Tanks and Development Partners in Ghana for prudent management and investment of revenues from petroleum culminated in the crafting of the Petroleum Revenue Management Act (PRMA) 2011 (Act 815), as amended (Act 893). It is section 29 of this Act that sets up the Investment Advisory Committee (IAC).
The Committee primarily was set up to advise the Finance Minister and for the general performance monitoring of the management of the GPFs which comprises the Ghana Stabilisation Fund and the Ghana Heritage Fund. Ghana is not the only country with such a structure. A variety of advisory committees exist. The Financial Committee of Chile made up of about six members plays a similar role as the IAC of Ghana – providing advice to the Ministry of Finance – on fundamental aspects of the investment policy for the Sovereign Wealth Funds. Uganda’s Public Finance Management Act (2015) also establishes an Investment Advisory Committee to advise the Minister on the investments made under the Petroleum Revenue Investment Reserve. Similarly, the Committee is made up of seven members albeit with a mix of institutional and non-institutional representation. The Investment Advisory Council (IAC) of the United States has a broader advisory role and composed of not more than 20 members established to solicit private sector advice to the Secretary of Commerce on the promotion and retention of Foreign Direct Investment (FDI) to the United States.
Composition & Functions of the IAC
Section 31 of the PRMA stipulates that the IAC be composed of seven members including a woman – who must be persons of proven competence in finance, investment, economics, business management, law or similar disciplines. Three key functions of the IAC as prescribed in the law are:      formulate and propose to the Minister, the investment policy and management of the Ghana Stabilisation Fund and the Ghana Heritage Fund and the Minister shall submit it for approval by Parliament; advise the Minister on the broad investment guidelines and overall management strategies relating to the Ghana Petroleum Funds and subsequently the Ghana Petroleum Wealth Fund that the Minister shall provide to the Governor, taking cognisance of international best practice of investments of a similar nature; and     develop for the Minister as part the investment guidelines, the benchmark portfolio, the desired returns from and the associated risks of the Ghana Petroleum Funds and subsequently, the Ghana Petroleum Wealth Fund taking into consideration the investment guidelines used by the Bank of Ghana for investments of a similar nature.
A key issue is the mode of appointment of the members of the IAC. Section 31 (4) of the PRMA states that the Minister in consultation with the Governor shall nominate the members of the Investment Advisory Committee for appointment by the President and that the President shall appoint the Chairperson of the Investment Advisory Committee. As the practice has been with such political appointments, what this means is that the IAC unlike PIAC, would be dissolved and reconstituted anytime there’s a change of President. The question is whether this represents best practice. In the case of the Financial Committee of Chile, some members of the Committee have been with the Committee since its inception in 2007. Depoliticisation of the appointment of the Committee cannot therefore be overruled if the Committee is to function properly and achieve the purpose of its establishment.
A valid concern is whether the non-existence of the Committee or the politicisation of appointments onto the Committee serves anyone’s interest. If the Minister in consultation with the Governor nominates the members to be appointed, and given the strategic role of the two nominating authorities in the management of the GPFs, there is a case to be made that the nominations and appointments are laced with intents, wittingly or unwittingly to  get people they “can comfortably work with”. Is professionalism sacrificed on the altar of political convenience or is it a case of business as usual?…………………………………….
By Dennis Gyeyir || Technical Officer at PIAC

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