If You’re Not Worried…You’re Not Paying Attention

In the next 10 years, 12 African countries will become major oil producers/exporters.  I wish I could be excited about the prospect of more African countries becoming oil producers.  But I can’t.  And the reason for that is simple: historically speaking, resources on or under African soil have meant distress to the local population and money in the West. Definitely not intuitive but history doesn’t lie. Image

Of course, the dynamics, when examined, tell a very sordid story of nepotism, corruption, backroom deals, and downright treachery…a collaborative making that involves not just Western corporate and government interests but local politicians and leaders of might.  Is this always the case?  Maybe not “always”, but this type of scenario has played out over and over again to the point that we now have a coined term, “resource curse”, when talking about the impact that abundant natural resources have on African economies.

An example that came to light recently involves the tiny West African country of Equatorial Guinea: population 700,000.  (You remember EG…the country made famous during the 2000 Summer Olympics by Eric the Eel – the ridiculously slow swimmer).  EG has Africa’s highest per capita GDP because it is one of the continent’s largest oil producers.  All that oil…all that revenue…yet still one of the lowest ranking nations on the UN’s Human Development Index.  About 75% of the population lives on less than $2 a day.  Where in the world is the money going?

In 2011, it became clear where all that money was going.  Teodoro Nguema Obiang Mangue, the son of EG’s “dictator for life” Teodoro Obiang Nguema Mbasogo became the target of a Department of Justice (USA) investigation as his $30M Malibu, California estate, along with a Maserati and 8 Ferraris, and other assets totaling in excess of $70M were targeted for forfeiture.  The excerpts of the official case filed by the DOJ can be found on this site

So, here we have yet another African poster child for the “resource curse” while we find it hard to pinpoint the corrupt neo-imperialists who actively participate.  Sure, we will hear that Exxon Mobil paid bribes to foreign officials, but that’s where it ends.  The public is left with the perception that this is a problem created solely by African greed.  But this is a topic for another time. 

I am worried…I worry for a country like Tanzania.  Stable and peaceful for so many decades post-independence; blessed with tourism assets second only to Brazil; and on the brink of an oil and gas era (as one of the 12 nations) that could further entrench under-development, corruption, and  mis-management.  But it doesn’t have to follow the “resource curse” model. 

A few weeks, it was reported that all Norwegians had become crown millionaires thanks to the country’s highly lucrative sovereign wealth fund buoyed by high oil prices.  Norway is one of the largest oil producers in the world.  In short, Norway has leveraged its resource abundance into a highly developed oil and gas industry and a quality of life benefit for its citizens.  You can’t juxtapose two models that are more starkly opposed than the Norwegian value-adding resource abundance and the African “resource curse.” 

We can philosophize as to why this variance exists and the reasons would be many.  But one critical difference, I believe, is the institutional voids and expertise deficiency that exists in many African, resource-rich nations…a scenario that creates an economic playground for the government and corporate interests of the rich nations and the traitorous government officials. 

So, pay attention to what happens to the newfound wealth under the ground.  Will it actually mean value for the citizens?

If you are inclined, check out an interesting essay that appeared in the September/October 2013 Foreign Affairs Journal by Larry Diamond and Jack Mosbacher – How to Escape the Resource Curse.  In it, the authors propose an “oil-to-cash” plan for the resource blessed African nations – “a direct distribution of a portion of oil revenues to citizens as taxable income.”  This approach is worth a read. 

 

Again, pay attention!

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5 comments

  1. Many thanks for this blog. I am sharing it immediately with my Facebook friends especially from Uganda. We are already heirs to the oil curse.

  2. I cant tell you how many times I’ve wished Nigeria ran out of oil. Oil with a lot of our near sighted leaders ruined a great country.

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