Nigeria and Angola are Africa’s top oil producing
countries. In 2011 Nigeria and Angola produced 2.2 million and 1.8 million
barrels of oil a day. In 2011, Nigeria’s oil revenues totaled 50.3 billion
while Angola’s oil injected $40 billion into the economy.
The
Resource Governance Index of the of the Revenue Watch Institute released on May
15, 2013 ranked Nigeria and Angola 40 and 41 respectively out of the 58
countries, which produce 80% of the world’s oil. The index found both countries
woefully weak four key governance areas: institutional and legal setting;
reporting practices; safeguards and quality controls and enabling
environment.
In
both Nigeria and Angola, lack probity, corruption and moribund institutions exclude
citizens from benefiting from resource revenues. Nigeria’s rural populations
have limited access to water, schools and health care. Moreover, about 70% of
Nigerians live on less than $1.25 a day. Angola has a life expectancy of
48.1and an average of school years of 4.4 years
The
economies of Angola and Nigeria have followed the trajectory of resources rich
economies. Economists have long held that resource rich countries are prone to
rent seeking, conflict, corruption, weak public intuitions and policies. Paul
Collier, Oxford University Economist, has argued that like aid resource
abundance makes other export activities uncompetitive and stifles economic
diversification. This phenomenon is known as the Dutch disease, after the
effects of the North Sea gas, which left the Dutch economy uncompetitive and
dependent on natural gas.
Ethiopia,
Kenya, Uganda, Mozambique and Tanzania are just about to enter the exclusive
league of resource rich countries. The oil and gas resources in Eastern Africa
are phenomenal. Tullow Oil has characterized East Africa’s oil finds as Africa’s most
significant. Similarly, US Geological Survey estimates that natural gas
reserves off the coast of Mozambique, Tanzania and Kenya are larger than those
of their oil-rich West African neighbors.
Africa
with its weak and ill-structured investment regulatory regime is the perfect target
of potentially exploitative accessions and opaque practices of multinational extractive
companies. More often than not the extractive companies are beholden to
political class and tend to front the narrow business interests of the
political elite. The relentless global quest for new energy sources will make
it impossible to stop the exploitation of Africa’s vast unexplored mineral
wealth by global multinationals. The challenge will be how to ensure that such
exploitation is equitable and humane. But we could learn from Russia and Latin
America who have avoided the predacious reach of global multinational corporations.
As
Africa mints new resource rich countries we must ask hard questions: Can these
new generation of resource rich countries escape the resources-curse? How can resource
rich countries use mineral wealth to build diversified economies and ensure equitable
economic and social development for its people? Can the new generation of
Africa’s resource countries rich learn from countries that have avoided the
resource curse?
To avoid the path
of a resource curse, Africa’s new resource rich countries must be strategic,
pragmatic and anticipatory. Much greater investment in physical, human, and
institutional capital is needed to ensure sustained and equitable benefits. While investors may bring foreign technical and skilled
personnel, African governments must insist on employment of local labour for
tasks that do not require specialized training. Moreover, it should be
mandatory for global multinational companies investing in Africa to train local
people in managing, operating and maintaining facilities. Over a period of
time, this will enable Africa to build highly skilled trained and skilled
workforce. There is opportunity to link with local universities to strengthen
teaching and research in science, technology, engineering and math.
Strong institutions help prevent rent seeking
behavior and ensure transparency in contracting, hence holding governments and
investors accountable. All contracts must be awarded
through a transparent international competitive bidding process buyers must
disclose the price quoted by the successful bidder. Strong institutions
will also ensure that regulatory agencies publish timely, comprehensive reports
on their operations, including detailed revenue and project information.
Contracts for resource exploitation
should be bundled with associated infrastructure development, including refineries,
petrochemical industries, fertilizer plants and power plants. This will
liberate African economies from the morally reprehensible practice of exporting
raw materials. Contracts could also be bundled with social investments such as roads,
airports, schools and hospitals.
This resource bonanza can and must
catalyze socio-economic and institutional change necessary to break the yoke of
poverty,which has held back Africa’s progress for more than half a century.
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