East Africa Can Learn from Niger Delta - Report
A report from the Brookings Institution’s Africa Growth Initiative (AGI) warns that, without safeguards, East Africa’s future oil and gas boom could turn into a “resource development curse” and calls for mistakes made in Nigeria since the 1950s not to be repeated here. It’s not the only report to do this.
‘Managing Natural Resources for Development in East Africa’ notes how in Tanzania, resources chiefly of gas have the potential to create $2.5bn/yr in government revenues, while the World Bank estimates show that by 2032 in Mozambique resource revenues could reach $9bn, accounting for 21% of total revenues if, as expected, major LNG projects get the development green-light next decade.
If well-managed, as in Norway, such revenues can transform economic and social development, the report argues.
If mismanaged, they lead to corruption, ethnic tensions over resources, macroeconomic instability, ‘Dutch disease’ (a sharp inflow of foreign capital, currency appreciation, and price inflation), and even conflict. Mozambique endured a civil war from 1977 to 1992 and sporadic killings still occur.
For four years, Brookings’ AGI has analysed ways to ensure that recent oil and gas finds in Kenya, Mozambique, Tanzania, and Uganda can be used to promote their economic development, with help from Uganda’s Makerere University, Oxfam and others.
AGI senior fellow Mwangi S Kimenyi, who died last year, and his colleague Zenia Lewis addressed six issues: land rights; free prior and informed consent (‘FPIC’) on petroleum exploration; government transparency and capacity in revenue collection; managing where they invest those proceeds; proper fiscal management of revenues; the role of civil society; and international standards of transparency.
On land rights, few people anywhere in sub-Saharan Africa feel the law recognises their land rights, they say pointing to a World Resources Institute survey. In Uganda, the authors point to a 2013 survey by International Alert that found, in one Ugandan oil exploration area, that 10% of households were displaced, and meagre compensation was paid out without preparations to help households manage it.
The authors note that Human Rights Watch has criticised how FPIC applies to mining in Uganda and Mozambique, impacting food security when land use is switched. They say the pertinence of FPIC to oil and natural gas is similarly important – and quote how Africa explorer Tullow Oil (active in Kenya) says that “grudging support” is not enough – there should be “active support” from local communities.
The authors raise real doubts over governments’ ability to collect taxes. “Tax administrators, customs agencies, and the regulatory agencies for oil and gas need to be better connected and cooperate,” the report urges. It cites a 2014 Global Financial Integrity commentary that found the value of Tanzania’s mining exports grew to $1.5bn in 2010, but government revenues from its sale was just $100mn (7%).
In a region where every country’s 2013 per capita was below $1000, more needs investing in health, schools and infrastructure. Southern Tanzania cities like Mtwara and Lindi, where gas has been found, have not benefited as much as the capital. A 512km gas pipe has been built from Mtwara to Dar es Salaam, but as yet no road. (In Angola, a gas pipe and parallel road from Soyo to Luanda are being developed in tandem). Learn from Nigeria, the authors urge, noting how only 39% of 15-18 year olds in Kenya’s oil and gas-rich Turkana area attend school (the national average is 70.9%). “Ensuring that the Turkana region receives benefits from the oil that is coming from it will be critical for ensuring that the inequality-related issues that can breed conflict, like those seen in the Niger Delta, are not repeated.”
Fiscal management of revenues will also be important though. To avoid ‘Dutch disease’, the authors suggest the use of Sovereign Wealth Funds (SWFs) to balance out the rough and smooth in revenues – although they warn these should be not become ‘slush funds’. Tanzania and Mozambique are planning SWFs. However, the report notes that the IMF has since pointed to more urgent priorities for Mozambique, namely curbing debt and lifting the lid on its secret loans.
Civil society organisations (CSOs) will a critical role in ensuring effective management of resource revenues, and policing transparency, the report stresses. The region is not short of good CSOs, but they face different obstacles. In Tanzania, they struggle to get information on royalty rates, in Kenya they face obstacles over land rights and environmental impacts while in Mozambique it is over keeping the government compliant on international transparency standards. In the region, only Mozambique and Tanzania are ‘compliant’ with the Extractive Industries Transparency Initiative (EITI). The report concludes: “Now is the right time for Kenya and Uganda to pursue EITI compliance.”
The Niger Delta caution to East Africa was separately made -- in a report recently published by Italian foreign affairs institute IAI -- by Paris’s Sciences Po university lecturer Philippe Copinschi: “Stabilising the political and social situation in Nigeria and avoiding repeating the same mistakes in Mozambique and Tanzania are probably the biggest challenges facing the gas industry in Sub-Saharan Africa.”
Mark Smedley