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PROGRAM INFORMATION DOCUMENT (PID)
APPRAISAL STAGE
Report No.: AB5556
Ghana Natural Resource and Environmental Governance - DPO
Operation Name
AFRICA
Region
Mining and other extractive (33%); Forestry (33%);Other industry
Sector
(17%);General agriculture, fishing and forestry sector (17%)
P118188
Project ID
GOVERNMENT OF GHANA
Borrower(s)
MINISTRY OF FINANCE
Implementing Agency
March 9, 2010
Date PID Prepared
April 12, 2010
Date of Appraisal
Authorization
May 27, 2010
Date of Board Approval
1. Country and Sector Background
Ghana’s growth has historically been fuelled by natural resources. However, recent impressive
growth rates, in the range of 6-7 percent per year, cannot be sustained in the face of alarmingly
high rates of natural resource and environment (NRE) depletion, which represents a cost to
Ghana’s GDP of about 10 percent per year according to the Country Environmental Analysis
(CEA). The forestry, wildlife, and mining sectors account for 15 percent of Ghana’s GDP, 25
percent of government revenues, and 60 percent of foreign exchange. The CEA stressed that the
resource base is at an important transition point, with forests and non-timber forest product
stocks rapidly decreasing and wildlife populations as well as biodiversity declining at an
alarming rate. This calls into question the sustained utilization of these resources. Over 70
percent of the population is dependent on natural resources for their basic food, water, and
energy requirements. Decreasing environmental quality, notably through air pollution and
inadequate water supply and sanitation, drastically constrains the quality of life and productivity
of Ghana’s population.
Ghana’s second Growth and Poverty Reduction Strategy (GPRS II) has the ambitious
overarching goals of sustaining economic growth and drastically reducing poverty and
inequalities. GPRS II has three distinct pillars—private sector competitiveness, human resource
development, and good governance and civic responsibility—with priorities identified by the
Strategic Environmental Assessment (SEA) included in each. The strategic directions outlined in
GPRS II marks the Government of Ghana’s (GoG) commitment to reduce NRE degradation,
which the NREG Development Policy Operation (DPO) will support particularly in regards to
environmental and natural resources management.
2. Operation Objectives
The objectives of the three operations in this DPO series are to (a) ensure predictable and
sustainable financing for the forest and wildlife sectors and effective law enforcement; (b)
improve mining sector revenue collection, management, and transparency; (c) address social
issues in forest and mining communities; and (d) mainstream environment into economic growth
through Strategic Environmental Assessment (SEA), Environmental Impact Assessment (EIA),
and development of a climate change strategy. NREG DPO3 continues to support GoG as it
continues to implement reforms in pursuit of these objectives.
3. Rationale for Bank Involvement
This programmatic DPO continues to address governance issues in the forestry and mining
sectors and improve environmental management. Currently forestry, wildlife and mining are key
to Ghana’s economy and share common challenges, including revenues that are not well
captured and large numbers of people dependent on the sector for their livelihood. In addition,
environmental policy (via the Environmental Protection Agency, EPA) needs to be strengthened
to effectively control pollution and to reduce long-term negative health and economic impacts
due to environmental degradation and climate change. Ghana has recognized the need to address
these important issues. The 2006-2009 Growth and Poverty Reduction Strategy (GPRS II) has
the overarching goals of sustaining economic growth of at least 6 percent per year to attain
middle-income country status and surpass the 2015 Millennium Development Goal of halving
poverty levels to 26 percent of the population and reducing inequalities.
4. Financing
NREG DPO-3 is proposed as an IDA Credit in the amount of US$10 million equivalent, to be
disbursed in a single tranche on effectiveness. NREG DPO-1 was in the amount of $US20
million equivalent and NREG DPO-2 was in the amount of US$10 million equivalent, with the
three operations together totaling US$50 million equivalent. The following development
partners are currently providing an additional US$16.6 million to support Ghana’s five year
NREG program: Agence Française de Développement (AFD), the United Kingdom’s
Department for International Development (DFID), the European Commission (EC), and the
Embassy of the Kingdom of the Netherlands in Ghana (EKN).
5. Institutional and Implementation Arrangements
Implementation by the Government of Ghana is through the Forestry Commission, Minerals
Commission, and Environmental Protection Agency together with their parent Ministries (i.e.,
respectively, the Ministry of Lands and Natural Resources and the Ministry of Environment,
Science and Technology). The program is coordinated by a high-level, inter-ministerial
committee and carried out under the supervision of the State Minister for Finance and Economic
Planning and supported by a Technical Coordination Committee.
6. Benefits and Risks
The DPO series is expected to provide three types of benefits. First, direct benefits expected at
completion of the series include: (a) improved management of government revenues and
finances in the forestry and mining sectors; (b) reduced illegal logging; (c) reduced social
conflict in forestry and mining communities; and (d) integration of environmental considerations
into policy formulation and implementation across government, including risks associated with
climate change. In addition, there are two intermediate benefits. The first is providing the
framework for IDA to deepen and expand its engagement in Ghana’s natural resources
governance reforms, which previously were supported to a more limited extent under the Poverty
Reduction Support Credits. The policy dialogue in this area has now been taken up by the
NREG program with the aim of achieving greater impact. The second is that by leveraging
contributions from multiple DPs and harmonizing contributions at the sector level, the NREG
series lays a strong foundation for GoG to implement natural resources related reforms , increase
aid effectiveness in line with and improved revenue collection, management and transparency;
for environmental protection, cross-sectoral environmental management, application of SEA to
inform decision-making and mainstream environment in sectors, improved EIA processes and
compliance.
Primary risks to the proposed operation include: (a) political risks,
(b) macroeconomic risks, (c) financial risks, (d) environmental risks, (e) social risks, and (f) risks
of misperception. The DPO series has put in place mitigation measures to address these potential
risks through: (a) promotion of dialogue and positive interaction between relevant stakeholder,
(b) establishment of mechanisms to adjust expenditure to the level of available financing; (c)
close monitoring of the release of funds to other government agencies; (d) undertaking an
environmental evaluation of targets and triggers and the holding of annual progress reviews; (e)
use of Poverty and Social Impact Analysis, increased social accountability and transparency, and
payments from carbon storage promoting activities; and (f) keeping up to date of key
stakeholders regarding objectives and positive outcomes.
7. Poverty and Social Impacts and Environment Aspects
Poverty and Social Impacts: Three sectors are covered by the NREG Program and have a wide
range of stakeholders. In addition to government (e.g., Forestry Commission, Minerals
Commission, EPA, etc.), primary stakeholders include communities, Traditional Authorities,
Stools, large corporate entities, small and micro-enterprises, artisanal miners, and chainsaw
operators. Many local-level actors, while impacted by policies, are distant from the policy
process and not sufficiently involved or adequately consulted in decision-making. The result has
in large part been disinterest or opposition, which in the medium-term could generate conflict.
Important stakeholders, such as CSOs and the media, have not always been sufficiently
consulted and engaged in policy decisions in the three sectors. The NREG program has offered a
significant opportunity for, and has engendered, an elaborate stakeholder engagement process
between GOG, DPs, CSOs, and primary stakeholders at all levels.
Five principal risks have been identified: (a) institutional risks (caused by weak institutions,
limited capacity, and lack of resources); (b) increased social conflict; (c) increased poverty and
vulnerability; (d) reduced investment and growth; and (e) climate change impacts. Social conflict
is at the heart of the risk scenario. The underpinning causes of social conflict include: (i)
discretionary power due to weak, confusing, or in some areas non-existent rights, (ii) weak
policy, legislative, and regulatory frameworks; (iii) inadequate access rights, incentives and
compensations; (iv) unconventional enforcement practices; and (v) human rights abuses.
Strategies identified for mitigating risks include: meaningful, timely and effective consultation
with communities; community based monitoring systems built into the enhanced policy and
regulatory frameworks for mining and forestry sectors; social protection arrangements to support
compensation and displacement packages for poor people during transition periods to ensure
they have adequate livelihoods; a realistic and comprehensive, macro-level “alternative
livelihood” strategy, incorporating responsibilities and approaches across several MDAs; a
systematic review of all current skills development and social protection packages to see how
these can be broadened and transferred to rural communities that are negatively impacted (in
terms of livelihoods) by tighter, more rigorously enforced, regulatory environments in forestry
and mining; actively involve forest-dependent communities by clarifying and securing their
tenure, property, and carbon rights and removing barriers to transparent, inclusive and
accountable forest governance; increasing the share of benefits accruing to local communities
from both the mining and forest sectors; and increased transparency and accountability
concerning the sharing of revenues
Environmental Impacts: An overarching objective of the NREG program is to achieve positive
environmental impacts. However, there is a possibility that some outcomes could lead to
unintended negative effects if insufficient due diligence to environmental impact is pursued
during implementation. For example: (a) new investment in the forest and wildlife and mining
sectors; or (b) diversification of the mineral production base leading to increased mineral
exploitation. However, NREG reduces risks by heightening attention to environmental impacts.
Also review of environmental implications of targets and triggers that could entail risk of
environmental damage is undertaken during annual progress reviews and during ongoing sector
dialog. Additionally, Ghana’s experience of SEA is also being reviewed to consolidate good
practice and inform inter-sectoral planning and implementation.
8. Contact point
Contact: John W. Fraser Stewart
Title: Sr Environmental Spec.
Tel: 5337+4119 / 233-21-214-119
Email: [email protected]
Location: Accra, Ghana (IBRD)
9. For more information contact:
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