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TRADE-AFRICA: How to Turn The Curse of Oil Into a Blessing

Stephanie Nieuwoudt

NAIROBI, May 25 2007 (IPS) - Africa’s abundance in natural resources, especially oil, has been called a curse because of the fierce global thirst that exists for these assets.

Oil and other mineral resources have led to conflict and corruption in countries like Sierra Leone (diamonds), Nigeria (oil), Equatorial Guinea (oil), the Democratic Republic of the Congo (diamonds, timber, rare fauna), Gabon (oil) and Angola (oil).

According to the Energy Information Administration, which supplies official statistics to the US government, there is more trade in oil globally than in any other product as oil from producing countries is shipped to consumer countries.

Millions of dollars are annually poured into Africa by international oil companies. Millions more are being spent in exploratory enterprises. It is a resource that is indispensable to the world economy. Therefore it should generate money to address the health and social issues of the oil-producing countries on the continent.

Not so. In Angola, a cholera epidemic wreaked havoc last year. President José Eduardo dos Santos was criticised for enriching himself from the oil industry while his people were dying due to a lack of clean drinking water.

In Equatorial Guinea the same pattern is repeated. According to the international human rights watchdog, Amnesty International, Equatorial Guinea is the second most corrupt country after Chad in Africa. It is also the continent’s third largest oil producer after Nigeria and Angola with a daily offshore production of 350,000 barrels. But 70 percent of the population survive on less than 1 US dollar a day.

In 2004 Riggs Bank of Washington was involved in a scandal when it was found that it had willingly accepted billions of dollars from the country’s leader, Teodoro Obiang Nguema Mbasago.

An inquiry was launched by the US senate which found that oil companies operating in this African country were bribing the countries leaders by paying school fees for their children and forming business deals with leaders.

Chinese state-owned firms are active in Southern Sudan, Nigeria and Angola. Critics say there is reason for concern about China’s interest in African oil. The Chinese government has been criticised for human rights abuses and a lack of accountability.

‘‘China is just one country extracting oil,” Sumayya Hassan Athmani, company secretary of the National Oil Company of Kenya told IPS. ‘‘It is unfair to blame China for problems if there are others in the oil industry whose hands are not clean. We all know what happened with Shell in Nigeria.

‘‘African countries have to look at internal structures in order to ensure that the oil wealth reaches the ordinary man and woman in the street. There have to be viable systems in place to monitor the industry,” according to Athmani.

‘‘The large oil companies are concerned about environmental, corruption and human rights issues in the Western world where there are structures in place guarding against abuse. In Africa and other developing countries where these structures are not in place, they have no scruples in forsaking these standards,” claimed Athmani.

‘‘If an oil company tars a road leading from the exploration fields to the company’s headquarters, it can most definitely not say it has met part of its corporate social responsibility,” Athmani pointed out.

Banks also have to guard against corruption. ‘‘It does not matter to how many good governance codes they have signed up to, if they do not in practice enforce these codes, it means nothing,” said Athmani.

Mary M’mukindia, an independent Kenyan analyst for the oil industry, said those in power ‘‘really like the free goods coming from the ground. It is a resource that belongs to nobody yet at the same time it belongs to everybody. Who really even knows how much oil there is?

‘‘Who is really in charge of measuring the amounts of oil coming out of the ground? In many countries there are no debit and credit controls. Governments get huge amounts of money from a resource that belongs to the people. But in Africa there is little sign of profit sharing,” said M’mukindia.

Like Athmani, M’mukindia argued that governments have to put in place structures which ensure that citizens benefit from oil wealth. She supports initiatives such as ‘‘Publish What you Pay” which forces international oil companies to publish the amounts of money they pay to governments.

Cesar Chelala, the award-winning writer on human rights issues, wrote in an article in the ‘‘Gulf Times” on 16 May this year that oil companies, the World Bank, the International Monetary Fund and powerful governments should demand transparency from African governments.

In 2002, British Prime Minister Tony Blair launched the Extractive Industries Transparency Initiative (EITI). Under the regulations of this initiative, countries rich in mineral and oil wealth as well as the companies extracting the wealth have to publish payments received and made.

So far, 14 of 23 oil-producing countries in Africa are members of EITI. Ironically, of all the countries, only Nigeria and companies working there have agreed to submit their accounts. The only other country in the world that has done this is Azerbaijan, according to an article by the Catholic Fund for Overseas Development. For EITI to work, M’mukindia says there should be three-way compliance. First: governments should ‘‘want to have” a transparency model. Second: extractive companies should be keen. In this regard, governments can implement laws which force companies to comply.

Third: Civil society organisations (CSO) should be involved. ‘‘They represent the people who are the real owners of the resources,” said M’mukindia.

But for CSOs to have an effect, they need to be well-informed. ‘‘They need to be brought up to speed with international standards and the intricacies of the industry. They have to understand the economy of the mining industry and they have to know what happens on the markets in Europe and America.

‘‘They have to know that the trade is especially robust in summer when the demand for petroleum products is higher than in winter,” according to M’mukindia.

Some countries have used their petrodollars to actually improve the lives of their citizens. In the Arab world, the Emirates of Dubai and Bahrain have utilised their petrodollars to diversify their economies.

In 2006, oil and gas revenues accounted for only around 3 percent of Dubai’s gross domestic product (GDP) of 46 billion US dollars. It is expected that the country’s oil reserves will run out within the next two decades. Yet the economy is booming thanks to the promotion of tourism and the positioning of the country as a shoppers’ paradise.

In Bahrain, 30 percent of GDP is derived from the oil industry. Structures are in place which see huge amounts of money being poured back into education, the tourism sector and health services. This has created jobs and investment opportunities for the local people.

In Norway, with around 50 percent of its exports consisting of oil, the government has secured the income for citizens by investing it in a national pension fund. Since 1990, the fund has seen dramatic growth and, with 200 billion US dollars, it is the largest pension fund in Europe.

‘‘These countries have realised that oil is a finite resource,” said Athmani. ‘‘They have diversified their economies. They are not overly dependent on oil. If this resource does run out, the other sectors will be strong enough to support the economy.”