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https://doi.org/10.3828/idpr.2018.

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Austin Dziwornu Ablo

Actors, networks and assemblages: local


content, corruption and the politics of SME’s
participation in Ghana’s oil and gas industry

Local content policies are relevant policy tools that can ensure that natural resource extraction leads to
the social and economic development of countries through local participation. With a focus on Ghana’s
local content policy and small and medium-scale enterprises (SME)’s participation, this article highlights
the complexities pertaining to the role of natural resource extraction in African economies. This work
further reiterates the need to focus on actors, networks and assemblages, and the interrelation between
social, material and ideational elements to better understand local participation in the extractive indus-
tries. The heterogeneous relations between actors and their constant reconfiguration creates a condition
for bifurcated SME’s participation in Ghana’s oil and gas industry.

Keywords: SMEs, local participation, actor-network, assemblages, oil and gas industry, Ghana

Introduction
Today, petroleum exploratory activities have moved to arctic and ultra-deepwater
environments. Oil and gas exploration offshore has increased in the last decade with
the Gulf of Mexico, Brazil and the Gulf of Guinea at the forefront (Bridge and
Le Billon, 2013). In Africa, multinational corporations (MNCs) have increased their
exploration and production activities in recent times, although the region accounts
for less than 10 per cent of the world’s proven oil reserves (Bridge and Le Billon, 2013;
Carmody, 2016; Ghazvinian, 2008). The increase in exploratory activities in Africa
can be attributed to factors such as the quality of crude oil from Africa, described as
‘light’ and ‘sweet’ and thus easier to refine (Bridge and Le Billon, 2013). Increasing
Chinese interest and investment in Africa is also driving exploratory activities, with
the Gulf of Guinea being described as ‘the world’s fastest-growing sources of energy’
(de Oliveira, 2007, 2).
In Ghana, although exploratory activities started in 1896 (Chitor, 2012; Donyiyah,
2013; McCaskie, 2008), it was not until 2007 that the oil and gas industry properly took
off with the commercial oil and gas discoveries by Kosmos Energy off the country’s
western coast (Ablo, 2016; 2018; McCaskie, 2008) and production starting in the third
quarter of 2010. Generally, however, natural resource extraction in African countries,
including Ghana, has not resulted in the structural transformation of economies. A

Austin Dziwornu Ablo is Lecturer in the Department of Geography and Resource Development, University of
Ghana, Legon LG59, Accra, Ghana; e-mail: aablo@ug.edu.gh
2 Austin Dziwornu Ablo

major policy initiative by the government of Ghana to promote a positive synergy


between the oil and gas sector and the rest of the economy is Ghana’s L. I. 2204;
the Petroleum (Local Content and Local Participation) Regulations 2013. In Ghana’s
local content policy (LCP), local content is seen as the proportion of materials,
personnel, financing, goods and services that are locally sourced (Ministry of Energy,
2013). Central to the LCP is the goal to increase the capability and international
competitiveness of local businesses, with an emphasis on the participation of small
and medium scale enterprises (SMEs). Regulation 9 (a), schedule (i) of L.I. 2204, for
example, requires first consideration to be given to local goods and services in the oil
and gas industry. Specifically, Regulation 11 mandates contractors, subcontractors,
licensees and allied entities to give preference to indigenous Ghanaian companies
(see Ablo 2015; 2016; 2017 for a detailed discussion of L.I. 2204) in any contracting
process. The LCP has the potential to promote forwards, backwards and consump-
tion linkages (see Ablo, 2015; Bloch and Owusu, 2012) between the oil and gas sector
and the rest of the Ghanaian economy. In 2013, the government of Ghana with the
support of the Jubilee Partners established the Enterprise Development Centre (EDC)
to train and enhance the capacity of SMEs and link them to business opportunities in
the oil and gas industry (Ablo, 2015; 2016). But a review of the EDC project revealed
it failed to make any significant impact in promoting SMEs’ participation in the oil
and gas industry (Ablo, 2017).
Research on Ghana’s oil and gas industry has examined if and how Ghana can
minimise the resource curse (van Gyampo, 2011; World Bank, 2009) while critiques
drawing on a political economy perspective question the resource curse thesis (Ayela-
zuno, 2014; Obeng-Odoom, 2013; 2014a; 2014b; Siakwah, 2017c) and how it conceptu-
alises the relationship between natural resource extraction and development. Panford
(2017) has examined the policy context of Ghana’s petroleum sector while Mohan and
Asante (2015) discussed the role of transnational factors in shaping elites’ coalition
with and governance of the oil and gas sector in the country. This article focuses on
Ghana’s LCP and SMEs’ participation in order to contribute to the literature on the
complexities pertaining to the role of natural resource extraction in African econo-
mies. It draws on relational geography perspectives that emphasise actors, networks
and assemblages to offer a nuanced view of how Ghana’s LCP shapes SMEs’ partici-
pation in the petroleum sector. The article shows that the assemblage of actors (MNCs,
SMEs, state officials) and their networks results in a bifurcated SMEs participation,
perpetuating inequality and corruption while legitimising elites’ capture of resource
rent. Through the illustrative cases, the article shows that party politics greatly shape
SMEs activities and the overall pursuit of local content and local participation in
the oil and gas sector. The poor regulatory environment and the complicity of some
officials of state institutions in corrupt practices affect value retention, and limit the
extent to which the LCP can promote local participation in the oil and gas sector.
Actors, networks and assemblages 3

The resource curse approach and its discords in framing the


extractive sector development nexus in Africa
The failure of natural resource wealth (hydrocarbon and mineral) to facilitate
positive economic development, and which instead results in low levels of democ-
racy, civil wars and the generally poor economic performance in developing econo-
mies, is commonly referred to as the ‘resource curse’ or ‘paradox of plenty’ (Auty,
1994; Karl, 2007; Sachs and Warner, 1995). It is argued that resource-rich developing
countries are vulnerable to the ‘Dutch disease’ by over-relying on the export of
natural resource while neglecting manufacturing, agriculture and service sectors of
the economy (Humphreys et al., 2007; Sachs and Warner, 1995). High income from
resource extraction crowds out manufacturing, and pre-existing export and import-
competing industries (Bacon and Tordo, 2006; Collier, 2010; Frankel, 2010). From the
orthodox resource curse approach (ORCA), the failure of developing countries to
manage the volatility in international commodities markets has negative economic
consequences. The lack of diversification in oil-dependent economies exposes a large
share of governments’ budget to fluctuations in oil prices (Bacon and Tordo, 2006).
Volatilities exert a negative influence on investment, income distribution and poverty
alleviation (Karl, 2007). The government of Ghana’s revenue from the oil industry
in the first half of 2016, for instance, was US$126.41 million, a 55 per cent reduction
when compared to the same period in 2015 when revenue was US$274.47 million.
This posed significant budgetary constraints to the government of Ghana.
Proponents of the ORCA argue that weak and corrupt institutions in developing
countries enable elites to capture rent from the resource sector (Bacon and Tordo,
2006; Humphreys et al., 2007; Mehlum et al. 2006). Lootable resources in weak insti-
tutional contexts, according to the ORCA, can lead to civil conflict (Humphreys, 2005;
Matthew et al., 2009; Mehlum et al., 2006; Sala-i-Martin and Subramanian, 2003).
Since the discovery and production of oil in Ghana, van Gyampo (2011), Gyimah-
Boadi and Prempeh (2012) and the World Bank (2009) argue that if the necessary
internal mechanisms are not put in place, Ghana could be plagued by the resource
curse.

How has the ORCA missed the point?


The ORCA is seen as an internalist discourse that ‘cleaves to the ahistorical liberal
faith in positive-sum and market-based growth’ (Bush and Graham, 2014, S3) in
explaining the development outcome of resource extraction. According to Ayela-
zuno (2014), improved liberal institutional contexts in developing countries consid-
erably minimise the internal risks of resource curse but not the external risks. As
Mohan and Asante (2015) show, transnational factors enable and shape the nature
4 Austin Dziwornu Ablo

of political coalitions in Ghana’s oil industry, with implication for governance of the
sector. McNeish and Logan (2012, 16) conclude that ORCA’s ‘explanations for the
links between natural resources and conflict do not adequately account for the role of
social forces or external political and economic environments in shaping the develop-
ment outcomes in resource-abundant countries’.
Thus, the ORCA has provided a rather ahistorical, uncritical and reductionist
analysis of the natural resource and development nexus (Campbell, 2003; McNeish
and Logan, 2012; Rosser, 2006; Watts, 2004). According to McNeish and Logan (2012,
8) ‘rather than seeing resource politics as a prism of historical temporality, the hypoth-
esis of [ORCA] tends to stereotype national politics and flatten out critical social and
historical evaluation’. The correlation between natural resource wealth and increased
risk of civil war is a simplistic and misleading proposition. Civil wars in resource
abundant countries are caused by various mechanisms and not just by looting mecha-
nisms (Ross, 2004). Regarding institutional weakness, Rosser (2006) contends that
historical processes have made institutions in the global South weak while powerful
groups have promoted their own interests (see also Acemoglu, 2003; Obeng-Odoom,
2014b). The ORCA overemphasised macroeconomic and national level issues with
limited attention to actors, networks and assemblages, which is discussed in the next
section.

Actors, networks and assemblages: conceptualising resource


extraction beyond the ‘curse’ and ‘blessing’ dictum
A nuanced framing of the role of the extractive sector in sub-Saharan African
economies requires discussions that transcend the ‘curse’ or ‘blessing’ discourse. In
this article, relational geographic perspectives that emphasise the sociotechnical and
spatial relations among actors such as firms, institutions and individuals across scale
(Boggs and Rantisi, 2003; Fløysand and Jakobsen, 2010; Haarstad, 2014; Swynge-
douw, 2004; Yeung, 2002) offer a more useful framework for conceptualising the
impacts of oil and gas extraction on societies. The actor-network theory (ANT) and
assemblages are relevant relational geography/geographic frameworks deployed in
this article.
ANT focusses on the interrelation between human and non-human actors to
explain sociotechnical, political and economic issues (Callon, 1999; Cressman, 2009;
Latour, 1999; Siakwah, 2017a). ANT extends geographic analyses beyond dualities such
as the structure-versus agency, materiality versus-sociality, knowledge versus-power
and global versus-local (Callon, 1999; Cressman, 2009; Siakwah, 2017a). In ANT,
the emphasis is on networks, associations and the dynamic relations of phenomena
across space and time (Siakwah, 2017b) which is the focus of analysis in this article. It is
based on the view that social realities are performed by multiple actors (Callon, 1999;
Actors, networks and assemblages 5

Law, 1992) and are ‘not out there to be discovered by either social actors or scientific
endeavours’ (Siakwah, 2017a, 2).
According to Latour (2005), ANT pays attention to networks, associations and
assemblages in framing how phenomena are formed and shaped. ANT allows us
to trace ‘the complex relationships that exist between governments, technologies,
knowledge, texts, money and people’ (Cressman, 2009, 4) and in the context of this
article, how such relationships influence the local content and SMEs participation in
Ghana’s oil and gas industry. Networks in ANT describe the relationships between
heterogeneous actors (Cressman, 2009; Gluckler, 2007; Murdoch, 1998; Siakwah,
2017a; 2017b) which are durable and resilient in form (Law, 1999). Networks as a
form describe the organisational structures within which people and institutions
interact (Cressman, 2009). The global oil and gas industry, for example, is a network
of governments, MNCs, local oil companies, technologies and civil society organisa-
tions across a scale which Watts (2005) describes as the oil complex. Networking, as a
process, relates to the activities that occur within the networks (Cressman, 2009; Law,
1999). ANT – as Law (1992; 1999), Latour (1999) and Callon (1999) argue – focuses
on how networks overcome resistance to gain internal coherence, on their dynamics,
and on how they enrol/ link actors in any sociotechnical situation. Thus, the interac-
tion between actors to form alliances and associations for their benefit, for instance,
is a dynamic process laden with diverse relations of power. Drawing on the political
settlement framework, for example, Mohan and Asante (2015) examined the networks
between actors in Ghana’s oil and gas sector and show how these networks influenced
the governance of the industry. Latour (2003) considers a network as the association
between heterogeneous elements which act as mediators. Networks and networking
are thus co-constitutive. Association, for Cressman (2009, 4), is ‘how networks come
to be larger and more influential than others, how they come to be more durable
through enrolling both social and material actors, and where power comes from and
how it is exerted’. By focusing on the association of actors, ANT allows as to map out
the function of each actor in the network (Latour, 1996; Siakwah, 2017b), the power
relations between actors and how they shape the development outcome of natural
resource extraction (Ablo, 2016). Central to ANT is translation/transformation which
is the process by which identities and conditions for interaction in a network are estab-
lished. The actors in a network, as well as their relations, are translated/transformed/
altered as networks change (Law, 1992) and this constant reconfiguration affects the
extent to which local content can be achieved in Ghana’s oil and gas industry.
Assemblage focusses on instability and change (Haarstad and Wanvik, 2016;
Siakwah, 2018) in the interrelation between social, material and ideational elements
(Haarstad and Wanvik, 2016). Watts (2013) views the oil and gas assemblages as a
global production network. For Watts (2005, 378), the ‘oil complex’ – ‘[assemblage]
of social, political and economic forces’ plays essential roles in shaping the outcomes
6 Austin Dziwornu Ablo

of extractive sectors in societies. Thus, the entrepreneurial strategies of Ghanaian


business, political decisions and the general performance of the Ghanaian economy,
for instance, all have implications for local content and local participation. According
to Ogden et al. (2013) and Haarstad and Wanvik (2016), assemblages describe the
constellation of material, social, expressive and physical components which deter-
mine the benefits that can be derived from resource extraction and the categories of
people who benefit the most.
Haarstad and Wanvik (2016) argue that assemblages are entities without essence
yet which involve dynamics between human and non-human elements in relation-
ships. This view of assemblages, as entities without essence, echoes the ANT perspec-
tives that entities ‘take their form and acquire their attributes as a result of their
relations with other entities’ (Law, 1999, 3). Both the assemblage and the ANT are
central in conceptualising the relations between the human and non-human compo-
nents that influence the effects of resource extraction. Understanding complex social
relations and the outcome of such interaction (Harvey and Braun, 1996; Massey,
1999; Murdoch, 2005) are central to conceptualising the relationship between natural
resource extraction and development. Placing emphasis on heterogeneous relations
enables the conceptualisation of the relationship between spatial and social processes.
Haarstad and Wanvik (2016, 439) argue, ‘assemblages theory stresses how the
interactions between seemingly separate elements produce unstable and contingent
entities […] always vulnerable to reconfigurations’. This notion is useful in unravel-
ling how cross-scalar interactions between actors, such as officials of MNCs, SMEs
and state institutions, influence the development outcome of Ghana’s oil and gas
industry. Paying attention to assemblages ‘composed of transnational policy arenas,
cross-scalar governance arrangements, socio-technical regimes and global economic
interlinkages’ (Haarstad and Wanvik, 2016, 444) offers an important framework for
analysing the development outcomes of natural resource extraction beyond the ‘curse’
and ‘blessing’ dictum that has dominated discourses on Africa’s extractive sector.

Methods
This article is based on fieldwork conducted between June and August 2017 in Accra,
Tema and Sekondi-Takoradi, Ghana’s industrial hubs and centres of oil and gas activ-
ities. The current data collection period builds on a series of fieldwork conducted in
the study areas since May 2011 which enabled analyses of the extent to which Ghana’s
LCP for the oil and gas sector has shaped SMEs’ participation in the petroleum sector.
Over the period of the fieldwork, seven SMEs were studied in detail to under-
stand their activities in the petroleum sector. Focusing on these businesses since 2011
enabled me to track the changes they have undergone, how they have adjusted to the
dynamics of the global oil and gas industry and local political and economic changes
Actors, networks and assemblages 7

for their successful participation. Although several local businesses are registered with
the Petroleum Commission to provide various goods and services to the oil and gas
industry, thirty-two of them, including the seven leading local firms, have been the
focus of this study as they have at various stages attempted to secure contracts in the
oil and gas industry. The overall goal is to underscore how Ghanaian SMEs navigate
through the oil and gas industry, the strategies they deploy to remain competitive and
how Ghana’s electoral cycle influences SMEs activities in the oil and gas industry. In
this article, attention is paid to how the relationships between key actors from institu-
tions including MNCs, service companies, the government of Ghana (through the
Ministry of Energy and Petroleum, the Petroleum Commission, the Ghana National
Petroleum Corporation (GNPC)) as well as Ghanaian entrepreneurs, influence SMEs
participation, as well as the overall goal of promoting local content in the oil and gas
industry.
Data for the article were produced through key informant interviews, observations
and review of documents from various stakeholder institutions. scholarly works and
news items. The interviewees included fourteen chief executive officers (CEOs) and
management officials of seven leading local businesses, three officials of two MNCs
and an official of a foreign service company, and five officials of two state institutions.
Broadly, the issues broached included local content and local participation strategies,
tender processes, corruption and the challenges of Ghanaian businesses’ participation
in the petroleum sector. Officials of the Petroleum Commission (the Commission)
and the Ministry of Energy and Petroleum were interviewed on how they ensure that
MNCs adhere to the local content requirements and measures put in place to ensure
that local businesses successfully participate in the oil and gas industry. Additionally,
the interviews also focused on corruption in the petroleum sector, measures taken to
manage it and to ensure value retention from the oil and gas industry.
The interviews with officials of MNCs and other foreign service companies delved
into tender processes and how they navigate through the Ghanaian business environ-
ment, the various ways by which they meet Ghana’s local content requirements,
especially relating to the engagement of Ghanaian businesses, and the challenges in
meeting local content targets. Management officials and CEOs of local businesses
were interviewed on their experiences and strategies in winning contracts and
participating in the oil industry. Also discussed are the challenges SMEs face in their
attempts to secure contracts and how they manage these challenges to effectively
participate. Their views were also sought on corruption in the industry and how that
affects their activities. The data were analysed by coding responses from the interviews
into themes based on the research goals and theoretical perspectives used. Different
narratives about and discourses relating to local content, SMEs and corruption in the
oil and gas industry were analysed.
8 Austin Dziwornu Ablo

SMEs, corruption and the politics of local participation


This section presents the research findings with emphasis on challenges SMEs face
in meeting the oil and gas industry standards, and the politics of SMEs participation
and corruption.

Global standards vs local deficiencies


A central requirement in Ghana’s LCP is that SMEs must meet various standards
required pertaining to the oil and gas industry in order to secure contracts. Basic to
these requirements is a well laid out organisational and management structure. But
in a series of work, this author, (Ablo, 2015; 2016; 2017), and Overå (2017) show that
Ghanaian SMEs lack these basic requirements due to the small scale (Fafchamps,
2003; Yoshino, 2011) at which they operate and the capital and technology of the oil
industry which are beyond their capacity (Karl, 2007; Overå, 2017).
By 2010 when commercial oil production started in Ghana, over 400 local SMEs
were registered in the petroleum sector. Currently, less than 200 of those SMEs regis-
tered by the end of 2010 are still operational, with fewer than 100 actively engaged
in any activities in the country’s oil and gas sector. This is due to the inability of
local SMEs to meet the financial capital and technology requirements of the oil and
gas sector. Typically, local businesses must have the financial capacity to pre-finance
projects before MNCs can award them contracts. Indeed, the lack of financial capital
is a major factor accounting for the limited number of SMEs that can successfully
secure contracts in the oil and gas sector (Ablo, 2017). This challenge is compounded
by the high interest rates and cumbersome processes involved in securing a loan from
commercial banks in Ghana, which limits the extent to which local businesses can
raise capital to back their activities in the oil and gas sector.
The study found that Ghanaian SMEs lack insurance for both the organisation
and personnel. According to the official of a foreign company, the cost of operating
an oil rig can be as high as a million dollars a day. Considering the high risk and cost
involved in offshore activities, SMEs must have insurance before they are awarded
contracts for offshore activities, for instance. Another important requirement for local
SMEs before they can be awarded contracts in the oil and gas sector is health, safety
and environmental (HSE) policies, in addition to proven track records (Damman
et al., 2011), which most SMEs lack. Most Ghanaian SMEs also lack International
Organization for Standardization (ISO), American Bureau of Shipping (ABS) and
other international certifications which are critical to the global oil and gas industry
(see also Ablo, 2017).
Six of the seven leading local SMEs included in this study, for example, have
various categories of ISO and ABS certification all of which are global standards
Actors, networks and assemblages 9

aimed at ensuring environmental and personal health and safety in the oil and gas
industry. The increasing emphasis on, and strict adherence to, international certifica-
tions and high HSE standards are apparent in light of the 2010 Deepwater Horizon
oil spill in the Gulf of Mexico which resulted in the loss of life, damage to marine
and wildlife habitats, and which adversely affected the fishing and tourism industries
(National Commission on the BP Deepwater Horizon Oil Spill, 2011). It was found
that the inability of Ghanaian SMEs to meet these standards limits their participation
in the oil and gas industry, despite the LCP provisions.

The politics of SME’s participation in the oil and gas industry


In addition to meeting capital requirements, technology, regulatory and international
standards, Ghanaian SMEs’ success in the oil and gas industry hinges on politics. The
study found that Ghanaian SMEs activity and the likelihood of securing contracts in
the oil industry is shaped by their affiliations to political parties. It was found that the
likelihood of SMEs securing contracts in the oil industry improves when the political
party which the owners support or are affiliated to is the government in power, while
their participation is more likely to plummet when their political party is in opposition.
One of the local companies located in Takoradi became operational in 2007,
shortly after the announcement of commercial oil and gas discovery, but had diffi-
culties navigating the oil and gas sector. According to the CEO, ‘we moved from
office to office lobbying for contracts’. At the initial stage of their activities in the oil
and gas industry, several Ghanaian businesses found it difficult to secure contracts
because there was no official channel for communicating opportunities to SMEs in
the oil industry, in addition to the fact that several of these businesses lacked an under-
standing of the dynamics of operating a business in the petroleum sector.
In December 2008, the ruling New Patriotic Party (NPP) lost the election to the
opposition National Democratic Congress (NDC). After the NDC came to power, it
became easier for the company to secure contracts because the CEO and his partners
were card-bearing members of the NDC. Subsequently, people in their networks were
appointed to influential positions in the Ministry of Energy and Petroleum and the
GNPC. Drawing on their networks, it became much easier for them to access infor-
mation on available business opportunities in the oil industry as well as getting the
necessary recommendations that made it possible for them to secure contracts. In
2010, the company was awarded its first major contract to service an oil rig. According
to the CEO, their success since then has been because they had ‘connections’ in state
institutions and the NDC government who not only provided information about
available opportunities, but facilitated their successful winning of contracts.
Between 2007 and 2013, the company diversified their activity portfolio from simply
recruiting rig workers to training rig workers, to housekeeping and catering, security
10 Austin Dziwornu Ablo

services, warehousing, transport and other logistics services in the oil and gas sector.
The company progressed from being a new player in the oil industry to becoming one
of the leading local companies. Until December 2016, the company constantly got
contracts from MNCs, GNPC and other service companies, both foreign and local.
But by the end of 2016 and the first quarter of 2017, the company lost several
contracts, and as at May 2017, they had no active contracts in the oil and gas industry.
In the December 2016 election, the NDC government had lost power to the opposi-
tion NPP. With their government in opposition, the company was unable to secure
contracts since their political networks do not command the influence they had while
in power. According to the human resources manager, the company is re-aligning
itself, building new networks in the ruling NPP government, to increase their chances
of securing contracts in the oil industry. While the opportunities for this company
dwindled because of the change in government, some new SMEs have emerged and
are now among the ‘local champions’ in providing services in the oil and gas industry.
In addition to the local political dynamics, the downturn in the company’s activi-
ties is also attributed to the maritime dispute between Ghana and Cote d’Ivoire. In
2014, Cote d’Ivoire took Ghana to the International Tribunal for the Law of the Sea
(ITLOS) over its maritime boundary. The location of Ghana’s offshore TEN oil field,
Cote d’Ivoire contended, was in its territory. The case dragged on until judgement was
given in favour of Ghana in September 2017. The dispute slowed down drilling activi-
ties in the disputed waters. While existing contracts between the government of Ghana
and MNCs pre-dating the dispute were executed, no new wells were drilled during
the period of the court hearing. With limited drilling activities going on, the available
opportunities for local businesses in Ghana’s oil industry were also affected. According
to an official of one of the MNCs whose activities were impacted by the court case, the
company had strategically started some activities in Cote d’Ivoire to position them in
order to commence operation there should the ruling go against Ghana.
Another major factor which indirectly affected the activities of Ghanaian businesses
is the recent fall in oil prices. While state officials and local business elites link the
fall in global oil prices in the past few years to the dwindling opportunities for local
businesses, an MNC official disputes this assertion. In her view, Ghana’s oil is of high
quality and commands premium rates on the international market and as such, was
not affected by the fall in oil prices. According to her, the maritime dispute between
Ghana and Cote d’Ivoire significantly affected exploratory activities in Ghana’s oil
fields, as new wells were not drilled much, more than because of the fluctuations on
the international commodities market. While external factors play essential roles in
shaping the opportunities for local participation, (re)configuration of internal political
dynamics and relations has significant implications for SMEs participation in the oil
and gas industry. Thus, the instability and change that characterises the assemblages
of actors and networks influence SMEs activities in the oil and gas industry.
Actors, networks and assemblages 11

‘You have to be corrupt to succeed’: SMEs navigation of the global


oil industry
All oil and gas companies, both local and foreign, irrespective of the scale of their
operations are required to register with the Petroleum Commission of Ghana. The
Commission approves all major contracts and transactions in the upstream sector.
This is aimed at ensuring that all standards and regulatory requirements, including
local participation, are adhered to. But this study found that corrupt practices of some
officials of the Commission and other state institutions are negatively affecting SMEs
activities and the overall agenda of promoting local participation in the oil and gas
industry.
Officials of some of the leading Ghanaian companies contend that corruption
is rampant in the oil and gas sector. One case of how corruption is shaping SMEs
activities in the oil and gas industry is given by officials of one of the leading local
companies whose services are welding and fabrication, procurement and logistics,
scaffolding, coating services, onshore and offshore labour, vessel repair and mainte-
nance, mooring, tank cleaning, supply of wire rope sling, oil spill response as well
as yard and facility rentals. With offices in Accra and Takoradi, and in partnership
with some foreign service companies, they operate in other African countries as well.
According to the CEO, SMEs have the capacity to grow and dominate the midstream
industry, providing highly specialised services and products if there is an enabling
environment. In his view, while Ghana’s LCP can promote SMEs’ participation, the
current system is rather being used by ‘powerful people [politicians, bureaucrats and
some entrepreneurs]’ in the society to exploit SMEs. The major hurdle SMEs must
circumvent is paying a bribe to some government officials to access information about
available contracts and to successfully secure contracts.
This claim was backed by the head of procurement of another SME who argued
that ‘in this industry, you have to be corrupt to succeed’. He made this assertion
while responding to a question relating to the extent of corruption in the oil and gas
industry. To back his claim, the procurement officer narrated one of their experi-
ences where they had to pay a bribe in order to secure a contract. According to
him, they had submitted a bid for a contract with an MNC and went through the
procurement process and were selected for the award of the contract. The MNC
subsequently forwarded the local SME’s documents to the Commission for approval
following which the contract would be signed and executed. However, after more
than two weeks of not receiving any feedback, they contacted the MNC and they
were informed that the contract document was still with the Commission pending
approval. The CEO and the procurement officer of the Ghanaian SME followed up
to the Commission to ascertain what was causing the delay of the approval. He notes
that the Commission official they met pulled out their file and said ‘is this for you?
You should have come to see me earlier so that this thing can be pushed for you’. The
12 Austin Dziwornu Ablo

interviewees claim that the official of the Commission handling their case demanded
money before he would sign off for the contract to proceed. They paid the bribe and
the contract was then approved and awarded to them.
The case above is not an isolated incidence since all the CEOs and senior manage-
ment personnel of the Ghanaian SMEs studied acknowledged paying bribes, or
what some of them described as ‘facilitation fees’, to state officials at some stage of
the bidding process to successfully secure contracts. Another case in point was given
by the crew manager of another Ghanaian SME, who claimed that their contract
was unduly delayed, and when they followed up, a government official requested
as part of conditions for the contract to be approved, to be made a shareholder in
the SME. According to the interviewee, they could not come to terms with making
the official a shareholder in the company hence they negotiated and paid him an
undisclosed sum of money. What is striking about the issue of bribing government
officials is that local SMEs consider paying bribes to state officials ‘normal and
business as usual’. While respondents acknowledged that bribing is bad practice and
illegal, they argue that it remains their ‘surest’ guarantee of successfully securing
contracts in the oil industry. Another feature that characterises bribing in relation
to SMEs participation in the oil and gas industry is that it often occurs between
government officials and SMEs, with officials in state agencies receiving money to
facilitate the award of contracts.
To ascertain the veracity of the claims by officials of SMEs, the issues were probed
further with officials of the Petroleum Commission and the Ministry of Energy and
Petroleum. While officials of the Petroleum Commission denied these allegations,
officials of the Ministry of Energy and Petroleum could not ‘confirm or deny these
allegations’. The Ministry officials, however, note that it is possible for bribing to
take place, although they could not tell how widespread it is. On the other hand, an
expatriate MNC official noted that they try as much as possible to avoid awarding the
contract to SMEs that have politicians or bureaucrats as board members or major stake-
holders. This, according to MNC officials, limits the potential for conflicts of interest
that can negatively affect their operation. MNCs sometimes conduct background
checks to identify who the owners of the SMEs are. These MNC officials, however,
acknowledge that their background checks do not always yield accurate outcomes,
since names on company documents can be a front for the actual owners. Importantly,
measures to prevent conflict of interests and corruption yield better results if they are
initiated and pursued by state regulatory agencies. The challenge of corruption is not
limited to the oil and gas industry. Recent Transparency International Corruption
Perception Index ranked Ghana 81 out of 180 countries with corruption perception
score forty out of 100.1

1 A score of 0 is considered highly corrupt and 100 considered highly clean.


Actors, networks and assemblages 13

Fronting and devaluation of local content


A central focus of Ghana’s local content law is the promotion of joint ventures between
local and foreign companies in the oil and gas industry with the aim of enhancing the
international competitiveness of Ghanaian companies, promote skill, expertise and
technology transfer. The current practice, however, is that some Ghanaian SMEs are
serving as fronts for foreign companies. In what some interviewees described as ‘locally
formed foreign companies’, businesses are registered by Ghanaians and operated as
if they are local companies, but are owned and operated by foreigners. Theoretically,
these companies meet the requirements of local companies. Thus, Ghanaians own
majority shares, occupy top management positions and see to the day-to-day activi-
ties of the company ‘on paper’. The reality, however, is that the majority shareholders
are foreigners who see to the day-to-day running of the company. Backed by foreign
capital, technology and expertise, these companies are competitive in Ghana’s oil
and gas sector as they can meet all the major requirements of the industry which
most Ghanaian SMEs struggle to meet. By operating as Ghanaian companies, these
firms benefit from the country’s LCP requirement for first consideration to be given
to Ghanaian SMEs that meet the oil and gas industry standards.
In one such company, I observed that although Ghanaians are employed, most
of them are what can be described as junior level administrative staff and not share-
holders, senior management officials or key decision makers in the company. The
company is, however, registered and operated as a Ghanaian company. The complicity
of some state officials also means that these practices are not properly monitored, or
perpetrators penalised. Consequently, even if these companies win large contracts,
most of the profit they make is repatriated to their home countries, and hence not
much value is retained in Ghana.

Bidding down the price: SME’s competition and value capture


The numerous Ghanaian SMEs that are competing for limited opportunities in the
oil and gas sector, often resort to underbidding or what informants term ‘bidding
down the price’. This is the practice whereby local companies quote low values for
contracts even if they make only marginal profits to remain competitive. A case in
point is when one of the SMEs had submitted a bid for a contract and after evalua-
tion, they were selected to provide rig workers for a foreign company. However, before
they could sign the contract, the foreign service company suspended the process for
the award of the contract to the local SME. When officials of the SME followed up,
the contract manager of the foreign service company asked them to reduce the rate
they were charging for the service. According to the CEO of the local SME, they
could not reduce the rate since that would have resulted in little to no profit for his
14 Austin Dziwornu Ablo

company as well as low salaries for the rig workers. Wondering why the foreign service
company asked them to reduce their rates after terms were agreed, the CEO of the
Ghanaian company was told that another Ghanaian company was ready to provide
the rig workers at a much lower rate. Thus, unless the SME initially selected for the
contract could reduce or match the low rate offered by the second SME, the contract
would not be awarded to them.
Given that the new Ghanaian company that was eventually awarded the contract
also went through the initial tender process, the interviewee believes this is an outcome
of some strong networks that the local company had with the foreign service company.
This is particularly so because the tender period had elapsed with several local compa-
nies shortlisted before selection of the most competitive bidder was announced. All
informants acknowledged that local companies submitting relatively lower bids are
a common practice. The scramble for the few opportunities is resulting in SMEs
‘bidding down’ contract values to remain competitive.

Actors, networks, assemblages and the politics of local


participation in the oil industry
The role of oil and gas and other natural resources in the development of African
economies remain a contested issue. The debate is, however, dominated by the
resource ‘curse’ and ‘blessing’ dictum (Humphreys et al., 2007; Sachs and Warner,
1995) with emphasis on the negative relationship between natural resource extraction
and economic development. This article shows, however, that limiting the discussing
to whether natural resources are a curse or blessing glosses over how the complex
networks of actors and global assemblages influence the outcome of resource extrac-
tion. Fixating on whether resources are a curse or blessing overemphasises the
coexistence of positive and negative outcomes from resource extraction (Ablo, 2016;
Siakwah, 2017b). By focusing on SMEs and the LCP in Ghana’s oil and gas industry,
this article examines how actors, networks and assemblages, as conceptual tools, can
unravel the complex factors that influence the impact of oil and gas extraction in
African economies. While LCPs have become important tools for fostering positive
synergies between natural resource extraction and development (Ablo, 2016; Ovadia,
2016; Ramdoo, 2015), successful local participation and equity of participation, as this
article further reiterates, is an interplay of actors, networks and assemblages.

Actors, networks and bifurcated SME participation


In academic, policy and civil society spheres, Ghana’s LCP is hailed as a positive
step towards promoting extractive sector-led development. The success of Ghanaian
Actors, networks and assemblages 15

SMEs in the oil industry can be a proxy for estimating the benefits of the LCP because
SMEs constitute a significant proportion of businesses in Ghana (Ablo, 2016; 2017;
Ablo and Overå, 2015; Abor and Quartey, 2010) and Africa as a whole (Fafchamps,
2003; Yoshino, 2011) and employ a significant number of people. The key actors
identified in this article, regarding the participation of SMEs in the petroleum sector,
are officials of MNCs, foreign service companies, officials of state institutions, civil
society organisations and management and CEOs of local SMEs.
This work highlights the fact that the participation of SMEs in the oil and gas
industry is an outcome of the heterogeneous relations (Latour, 2005; Siakwah, 2017a)
between MNCs, state officials and SMEs. Although the LCP requires a preference for
Ghanaian businesses, SMEs must first meet the financial and technological standards
(Ablo, 2017) of the oil and gas industry in order to gain access to and participate in
the sector. ANT places emphasis not only on humans and their assemblages but also
on non-human elements (see Haarstad and Wanvik, 2016; Murdoch, 1998; Siakwah,
2017a). As shown in this article, the high technological and financial requirements of
the global oil and gas industry which are normally beyond local capacity (Ablo, 2016;
2017) are critical elements in determining the success of LCPs and the promotion
of intersectoral linkages between the oil and gas sector and broader national econo-
mies (Klueh et al., 2007). Crucially, the standards of the oil and gas industry and the
capacity of SMEs to meet them is a major determinant of whether they participate
and, as such, whether having an LCP in place, as in the case of Ghana, might neces-
sarily translate into extensive local participation in the oil and gas sector. Additionally,
the geopolitical relations between Ghana and Cote d’Ivoire, for example, played a
critical role in shaping the pursuit of LCP in Ghana. The maritime boundary dispute
between Ghana and Cote d’Ivoire limited exploratory activities in Ghana’s oil fields
and this resulted in a reduction in the available opportunities for local businesses.
Beyond the capital and technological requirements, the relationship between
Ghanaian SMEs, state officials and MNCs greatly determines which local companies
can take advantage of the opportunities in the oil and gas industry. Thus, emphasising
the lack of expertise (Karl, 2007) alone cannot properly explain the limited linkages
between extractive sectors and broader national economies in African countries. As
shown in this article, the relationship between local entrepreneurs, politicians and
bureaucrats influences SMEs participation in the oil and gas industry. The assemblage
of these actors and networks (Cressman, 2009; Latour, 2005; Murdoch, 1998; Siakwah,
2017a) is characterised by instability and change (Haarstad and Wanvik, 2016) with
implication for SMEs’ participation in the oil and gas industry. The relation between
politicians and local entrepreneurs is in a constant state of flux, and depending on
which political party is in power, Ghanaian SMEs must constantly form relations
to remain competitive and increase their chances of securing contracts in the oil
and gas industry. Thus, the heterogeneity of the relations between actors (Callon,
16 Austin Dziwornu Ablo

1999; Latour, 1996; 1999; 2003; 2005; Law, 1992; 1999) as espoused in ANT, and their
constant reconfiguration, implies that SMEs participation in the oil and gas industry
in Ghana can be directly linked to the country’s political cycle. As illustrated in the
article, some SMEs’ active participation in the oil and gas industry is dependent on
which political party is in power. This supports Mohan and Asante’s (2015) findings of
how Ghana’s political settlement and transnational factors influence the governance
of the country’s oil and gas sector.
Importantly, the activities of various actors, their networks and assemblages create
a condition for bifurcated SMEs participation. This tendency of LCPs having dual
effects was also found in the study of local content in Angola’s oil industry by Ovadia
(2012). In the case of Ghana, thus, only a few politically connected SMEs can take
advantage of the opportunities in the oil and gas sector. The success of an LCP in the
extractive sector is therefore mediated by actors, networks and globalised assemblages.
In Ghana’s oil and gas industry, these networks of actors and their relationships have
created the platform for corruption, as shown by interviewees’ claim that ‘you have
to be corrupt’ to succeed. Although LCPs can drive intersectoral linkages between
extractive sectors and national economies (Bloch and Owusu, 2012; Klueh et al., 2007;
Ramdoo, 2015) they can serve as avenues for corruption, legitimise elites’ capture of
resource rent and perpetuate inequality (Ablo, 2017; Ovadia, 2012) as this article has
also demonstrated.

The mirage of local participation


LCPs are not only aimed at promoting local participation in the extractive sectors
but serve as mechanisms to promote technology and skill transfer (Ablo, 2016;
Ovadia, 2012; Ramdoo, 2015). Successful transfer of technology and expertise to
local businesses can potentially improve the international competitiveness of SMEs
while ensuring that the benefits of the oil industry transcend the ‘age of oil’. The
government of Ghana – through the LCP – seeks to promote joint ventures between
Ghanaian and foreign businesses. But as this study has demonstrated, these joint
ventures exist merely on paper. Ghanaian ownership of companies does not qualify as
‘local’. Largely, Ghanaians are fronting for foreign companies. While in countries like
Norway (Erling, 2006), joint ventures fostered by their LCP led to technology transfer
and the growth of Norwegian companies such as Ocean Rig AS, Odfjell Drilling and
the state oil company Statoil, Ghanaian business are fronting for foreign companies
and creating a mirage of local SMEs’ participation in the oil industry.
The situation is compounded by the complicity of state officials in condoning
these practices and not strictly monitoring and enforcing the LCP regulations. This
devalues the benefits that the country derives from the oil and gas sector. The corrupt
practices of foreign investors, Ghanaian SMEs and state officials are thus limiting
Actors, networks and assemblages 17

value retention from the oil and gas sector. Indeed, having regulatory frameworks
such as LCPs alone in place does not guarantee positive synergies between the extrac-
tive sector and economies, but rather as the case of SMEs and Ghana’s LCP illustrates
in this article, is mediated by actors, networks and assemblages (Haarstad and Wanvik,
2016; Latour, 2003; 2005; Siakwah, 2017a; 2017b). The types of relations between
actors influenced by the dynamics of power and interests thus result in whether there
is actual participation in the oil and gas industry by Ghanaian SMEs, or whether there
exists merely a mirage of SME participation.

The industry standards and local participation


The oil and gas industry, in addition to its capital intensity, requires high HSE stand-
ards, which SMEs are not able to meet (Ablo, 2017). The risks of environmental
destruction and loss of life, as was the case in the Gulf of Mexico (National Commis-
sion on the BP Deepwater Horizon Oil Spill, 2011) has heightened the need for high
HSE standards in the oil industry. Local SMEs must, therefore, meet the pertinent
industry standards to be able to service the oil and gas sector. Thus, from an ANT
perspective, these standards are necessary for SMEs’ enrolment in the global oil and
gas network, and the assemblage of their relations with other actors will translate into
the extent of their participation in the industry.
The limited participation by SMEs in the oil and gas industry is an outcome of
the assemblages of capital and technological requirements of the global oil and gas
industry. These standards, as studies have shown (Ablo, 2017; Karl, 2007) are beyond
local capacity. In Ghana, apart from a few SMEs that can meet these standards, the
rest are unable to take advantage of the opportunities. The assemblage of global oil
and gas standards and the ability of local SMEs to meet these requirement affects
local participation. Some Ghanaians SMEs as a response have resorted to fronting
for foreign companies to meet various regulatory standards to enrol in the oil and gas
network and secure contracts, but it means a significant proportion of the revenue
gained might not be retained in the country.

Conclusion
LCPs are relevant policy tools that can ensure that natural resource extraction leads to
the social and economic development of countries. Whether LCPs promote positive
relationships between the resource sector and the rest of economies, this article
argues, is mediated by actors, networks and globalised assemblages (Callon, 1999;
Haarstad and Wanvik, 2016; Latour, 2005; Law, 1992; Siakwah, 2017a; 2017b). The
assemblages of actors and their networks can systematically lead to the exclusion from
the country’s oil and gas industry by various SMEs and promote only those SMEs
18 Austin Dziwornu Ablo

that are strategically positioned in relevant political and transnational networks. The
outcome of resource extraction, therefore, cannot be clear if analyses are limited to
whether they are a ‘blessing’ or ‘curse’.
The activities of actors in the oil and gas industry value chain show that LCPs can
have dual effects (Ablo, 2016; Ovadia, 2012). Depending on the assemblage of actors
and their networks, Ghana’s LCP promotes some local SME participation but, in
the process, legitimises local elites’ capture of oil rent. The configuration of relations
between actors and their networks can potentially lead to inequality, as businesses that
are not integrated into networks that can foster their activities in the oil and gas sector
are not able to take advantage of opportunities in the sector. It is therefore concluded
that focus on the interrelation between social, material and ideational elements, as
well as actors and their networks, is essential in conceptualising the role of natural
resource extraction in Africa’s political economy.

Acknowledgement
This project was supported by the University of Ghana Building a New Generation
of Academics in Africa (BANGA-Africa) Project, with funding from the Carnegie
Corporation of New York. The statements made and views expressed are solely the
responsibility of the author.

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