Foreign firms operating in Ghana could be forced to renegotiate existing contracts as internal rifts within the ruling political party increase the opposition’s chances of securing victory in the country's upcoming elections. According to the specialist intelligence firm Exclusive Analysis, the death of the country's president, John Atta-Mills, and the ongoing divisions within the ruling National Democratic Congress (NDC) party have increased the likelihood of an opposition victory in Ghana’s December 2012 elections.
“The NDC is likely to hold an emergency meeting to nominate John Mahama as its presidential candidate,” said Natznet Tesfay, head of Africa forecasting at Exclusive Analysis. “However, [the] ascension of a northerner to the presidency will likely swing votes in favour of the opposition New Patriotic Party [NPP]. An opposition victory will heighten contract risks for firms associated with the outgoing administration, as is typical in Ghanaian political successions. In 2009, when the NDC took power from the NPP's then-president John Kufuor, the NDC launched probes into energy contracts awarded under Mr Kufuor.”
The swift and peaceful succession of the country’s former vice-president, Mr Mahama, to serve as caretaker president following the sudden death of Mr Atta-Mills on July 24, 2012, was widely commended as affirming the maturity of Ghana’s democracy. In line with the country’s constitution, the election of Mr Mahama, a Christian from Ghana’s predominantly Muslim north, does not automatically make him the ruling party’s presidential candidate. Although he is likely to be nominated as the NDC’s presidential candidate for the forthcoming elections, the NDC’s dwindling popularity, coupled with a culture of voting based on ethnicity, could lead to a change in government.
“The death of Mr Atta-Mills and the fractionalisation of the NDC party [has] increased the likelihood of an opposition NPP victory at the polls, due to a tradition of voting along ethnic lines,” said Ms Tesfay. “Amid accusations of rampant corruption within the NDC government from opposition and civil society groups, a change in government would raise the risks of probes against NDC officials [and companies] in the energy and construction sectors. Given the NDC's close relationship with the Chinese government and investors, the NPP would probably scrutinise Chinese mining and oil concessions that have been awarded.”
In the lead up to the elections, Mr Mahama is expected to ensure policy continuity. Indeed, if he were elected in the upcoming elections, foreign firms would be unlikely to renegotiate their existing contractual agreements. “We assess that Mr Mahama is unlikely to review contracts approved by his predecessor as he has been involved and active in the government's decisions, particularly in the past two years when Mr Atta-Mills' health was deteriorating,” explained Ms Tesfay. “[For example] Mr Mahama, while vice-president, was a central [figure] in negotiating $14bn-worth of Chinese oil-backed loans, of which $3bn was approved by parliament and is due for disbursement by the end of 2012.”