The discovery of commercially significant quantities of
oil in Uganda in 2006 was consequential. The discoveries in Uganda have been
followed by discoveries in Kenya in 2012. Tanzania has seen world-class offshore
gas discoveries. Experts believe more hydrocarbons have been discovered in East
Africa in the last couple years than anywhere else on the planet. East Africa has
entered a veritable hydrocarbon epoch.
Africa’s experience with oil and minerals has not been
rosy. In a majority of Africa’s resource-rich countries, exploitation of
natural resources is invariably linked to corruption, economic stagnation, conflict,
social inequality and widespread poverty. This apparent paradox is commonly
referred to as the Resource Curse.
Economists have long held that resource rich countries are prone to rent
seeking, conflict, corruption, and weak public institutions. Paul Collier,
Oxford University Economist, has argued that poor management of large inflows
of natural resource revenues makes other export activities uncompetitive and
stifles economic diversification, leading to lower economic growth.
Angola and Nigeria are prime examples of the curse
natural resource can bring to a country.
Angola is considered the archetypal case of the resource
curse. The proceeds of this vast wealth financed two and half decades of civil
war, just two years after independence. Millions of dollars in concessionaires’
bonuses are stashed abroad and much of the revenue is sequestered in a secret
“parallel budget” with no public accountability. Angola’s poverty rate is
estimated at 68%. Angola also ranks among the lowest in the world on other
social indicators. According to a UNDP report of 2007, its combined school
enrollment ratio was 25.6% and life expectancy was about 42 years
Similarly, 50
years of oil production has not produced growth and prosperity in Nigeria. Nigeria’s
annual per capita income of US$1,400 is less than that of Senegal, which
exports mainly fish and nuts. Armed, rebels operating under the name of the
Movement for the Emancipation of the Niger Delta (MEND), have intensified
attacks on oil platforms and pumping stations. According to leaked internal
financial data accessed by the Guardian, Royal Dutch Shell paid Nigerian
security forces tens of millions of dollars a year to guard their installations
and staff in the Niger delta about $383 million. A significant amount of Shell
funding is paid through senior military officials, exacerbating corruption and
elite rent seeking.
Is East Africa prepared to navigate the slippery slope of
the hydrocarbons bonanza? Going by history as well as recent events – social
and political – the spectre of the "resource curse" looms large in
East Africa.
The Albertine Rift is a picturesque expanse of forested
mountains and home of the rare Mountain Gorilla. Along with gorillas, the
Ugandan stretch of the Albertine Rift is home to breathtaking biodiversity,
nine national parks and four game reserves. However, in 2006, geologists
discovered treasure underneath the Albertine Rift; oil. The Lake Albert region
is therefore ecologically sensitive. It is also politically sensitive because
it lies between two countries with a history of conflict. Environmental
fragility and conflict is the quintessential witches brew.
There are growing worries that Uganda’s oil may
exacerbate official corruption. Italian company ENI has been accused of trying
to bribe senior government officials to secure oil rights. In December 2012,
the Ugandan parliament passed the Petroleum Bill to regulate the country's
emerging oil sector. The law grants the oil minister the power to grant and
revoke licenses, including negotiating production sharing agreements without
parliamentary oversight. Transparency is largely seen as an affront to long-term
social cohesion. Diplomats and key players in the oil sector think the new law
amounts to handing an “ATM Machine to the government.
The gas rich region of Mtwara in southern Tanzania
carries an inordinate burden of malaria, diarrhea and respiratory infections,
which are the leading causes of morbidity and mortality. Infant and maternal
mortality in Mtwara is one of the highest in the country. Similarly, at 48,
life expectancy in Mtwara is among the lowest in the country. Here is how one
resident characterized Mtwara; “since independence, we have had no roads,
schools, hospitals or access to water, and employment is nightmare. Mtwara is a
symbol of poverty in our country."
As one would imagine, expectation among the communities
of Mtwara is very high; everyone expects instant, dramatic change in fortunes.
From jobs, better public infrastructure and improved services. More
importantly, the local communities expect to retain and control significant
proportions of revenues accruing from the sale of resources. Contestation over
revenue from gas resources has been characterized by violence in the recent
weeks as local communities march in protest against the construction of a pipeline
to transport gas from Mtwara to Dar-es-Salaam.
Politicians have weighed in on the question of resource
revenue. Musoma MP, Hon. Mkono, fully supports Mtwara residents opposition to
the construction of the gas pipeline to Dar-es-Salaam arguing that Mtwara
residents’ have learned from the Buhemba Gold Mine in the Mara region a private
company extracted gold from Mara between 1994 and 2004, but years later the
region continues to be among the least developed in the country with few
schools, no tarmacked roads and no hospitals. Mtwara MP, Hasnain Mohamed Murji
also supports agitation for more equitable distribution of natural resource
revenues. In Hon Mukono’s view, Tanzania’s economic policies have failed to
protect local interests.
Politicians with a national purview have a different
view. Wading into the acrimonious debate, President Jakaya Kikwete argued that
Mwanza and Shinyanga “have been producing gold, but they have never claimed to
enjoy alone all benefits from gold." According to Energy and Minerals
Minister Sospeter Muhongo, “the gas issue is being politicized and Tanzanians
should avoid injecting politics into serious matters of national interest”.
For the Turkana people of northern Kenya, pastoralism,
the main source of livelihood has become exceptionally untenable in the past
two decades. The drought of 2011 was particularly devastating. More than a
quarter million of people in Turkana county live on food aid and 9 out of 10
people live below $1.25 a day. Completion of Ethiopia’s Gibe III Dam on the Omo
River could transform Lake Turkana into Africa’s Aral Sea, destroying vital
ecosystems and the fragile livelihoods they support.
According to experts it took 58 wells to find the first
commercially viable oil discovery in the North Sea. For Turkana, it took only
three. But can oil really be a game changer; a sign that a big payday for the
Turkana people is at hand? Kenya’s key sectors, from agriculture and power
generation to forestry and fuel imports, have all been appropriated by the
powerful vested interests always jostling to control the country. The question
on everyone’s mind is who will control the country’s oil? Moreover, ethnic
identity, including control of communal resources, especially has often been at
the center of Kenya’s historical socio-economic and political troubles.
Politicians have fostered economic opportunities for their acolytes. The
pressure valve last blew in 2007, when accusations of vote rigging in a general
election exploded into ethnically charged violence. More than 1,000 people died
and many more were displaced.
What is clear is that there is a high correlation between
resource curse and unaccountable institutions of governance. Kenya, Uganda and
Tanzania are all characterized by weak institutions of private property, a weak
bureaucratic capacity, a proclivity for strong presidential rather than
parliamentary democracy. These characteristics make all three countries highly
vulnerable to the resource curse despite honest efforts, with the help of the
World Bank and the African Development Bank, to institute strong policy and
legal regimes.
MIT economist Daron Acemoglu argues that institutions of
private property ensure protection of property rights of investors, provide
political stability, and ensure the political elites are restrained while also
promoting participation of the citizens. A culture of democratic political
competition, a strong parliamentary democracy and a broad based participation
at the local level can provide safeguards against a resource curse.
Accountable democratic governance buttressed by competitive
democratic politics and a vibrant parliamentary system is something of a sine
qua non for effective natural resource governance. Kenya’s vibrant political competition along
with devolved governance structures presents a starting point for building
strong technical and institutional capacity to
ensure separation of policy, regulatory and commercial development roles for
effective natural resource governance.
Although strong institutions of private property are
lacking, better outcomes on hydrocarbon governance may result from strengthening transparency. Each country must
sign up to the Extractive Industries Transparency Initiative, which requires
companies to publish all payments to the government and the government to
publish all payments received from extractive companies. All stakeholders must
demand public disclosure of spending, revenue
accrued from extractive industries and establishment of a sovereign wealth fund
to regulate reckless spending of such revenues, which could undermine
competitiveness in non-hydrocarbon sectors.
East Africa
can avoid the resource curse. But there is no silver bullet legislation and no
right advise, beyond the overriding imperative of political accountability and inclusive
competitive parliamentary democratic governance.