Tanzania

If It Happens In The US Then It Happens In Africa

On January 9, 2014, a potentially dangerous chemical called 4-methylcyclohexane (MCHM) (MCHM is used in processing coal) spilled out of 17 storage tanks into the Elk River near Charleston, West Virginia (USA), just under 2 miles from the city’s only fresh water intake.

 elkriver

An estimated 10,000 gallons of MCHM leaked into the river causing 300,000 residents of the area to go without water for over a month.  President Obama declared this a federal emergency and US National Guard troops delivered bottled water to residents to sustain them through the rest of the clean up.

Bloomberg Businessweek has an excellent account of the event along with the background of corporate negligence and lack of regulatory oversight that contributed to yet another environmental disaster.

Although chemical spills happen every day (literally…last year we had 3,885 self-reported spills from 76 different publicly traded companies in the US), when one of this magnitude happens, I can’t help but think about what may be happening outside the public’s view in places less accustomed to 24-7 media and accountability.

I make the connection to the energy sector in Africa.

The oil & gas industry is heavily dependent on chemicals through all stages, using and processing compounds that aid in drilling, cementing, completion, and production.  An article published by the National Center for Biotechnology Information (a federally funded research foundation) notes that “the occupational hazards of exposure to [oil & gas chemicals] has received little attention.”

This is in the US where we have a well-developed environmental protection and public health research framework.  It is no revelation that environmental regulation in resource rich African nations is often unable to match the political clout and professional credibility of the energy industry.  This translates to double standards and unhindered negligent (sometimes criminal) behavior on the part of companies.

Some years ago, I worked as an environmental consultant in Addis Ababa, Ethiopia and I remember talking with a manager of the Environmental Protection Authority who was frustrated by the lack of capacity within his organization.  He told me it was like fighting a battle with one hand tied behind his back.  This is a tough fight no matter whom you face; but particularly when dealing with the well-resourced energy sector.

East Africa is the next big focus for the oil and gas industry.  Significant deposits have been discovered in countries like Tanzania and Uganda.  The concern of the “resource curse” notwithstanding, many people believe that this industry will pay off for the region.  And I agree; I believe it SHOULD pay off!  But, as highlighted, there are characteristics of this industry that can have a negative bearing on the population.

Oil & gas and other resource extraction industries are by no means the only sources of environmental concern. But their contribution to the issue points to a desperate need that countries have to develop their environmental regulation capacities to proactively guide the sustainable development of the extractive industries.

This is the reason I feel very strongly about human capital development on the African continent.  It is the most critical component of Africa’s development process.  Of course, a competitive and well-developed labor pool is central for economic development.  But in the context of sustainability and resource protection, it will help ensure that there is capacity, in organizations like Ethiopia’s EPA, to guard against intended and unintended impacts of an ineffectively regulated private sector.

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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!