The world is full of countries that have suffered rather than gained
from natural resource endowments. At the extreme, these resource
announcements are feeding into a misleading narrative that they can pull
countries out of poverty. ILLUSTRATION | JOHN NYAGAH | NMG
The discovery of commercially recoverable reserves of oil in East Africa brought with it a lot of euphoria.
Expectations
were and still are that the resultant petro-dollars will trigger
inclusive economic growth. These high expectations are in no small part
also fuelled by governments and the private sector; and are not entirely
misplaced given that oil revenues can result in windfall revenues.
Indeed,
the superintendence of Norwegian and Alaskan oil and Botswana’s
minerals demonstrates that when managed well, extractive resources can
have a beneficial multiplier effect.
In 2017, Norway’s oil fund topped $1 trillion in assets, for a population of just over five million people.
Bringing
the oil to market in Uganda and Kenya has taken more than five years
while the natural gas project in Tanzania is yet to commence since
significant discoveries in 2010.
The difficulties in
putting in place the right legal and policy framework have demonstrated
that the transformative impact of oil revenue is not a certainty.
It
is therefore important to temper the discourse around extractives with
some level of realism. Extractives alone will not solve all the
development problems of the region but can make a useful contribution.
Sub-surface
oil resources can be transformed into positive outcomes only when they
are judiciously managed, and their output directed to sectors that
matter most to citizens.
This is also the premise of
Oxfam’s and African Media Initiative’s multi-stakeholder dialogue in
Nairobi in August – for key sector leaders to begin having these
conversations and learn from each other.
The world is
full of countries that have suffered rather than gained from natural
resource endowments. At the extreme, these resource announcements are
feeding into a misleading narrative that they can pull countries out of
poverty.
This appears to imply that other critical
economic and social sectors – such as agriculture, one of the biggest
contributors to national and regional growth – can be ignored.
Jobs? Where?
Infrastructure
developments such as the East Africa Crude Oil Pipeline have been
fast-tracked, posing the risk of circumventing legalities and
international standards; as well as of disregarding communities’ rights.
Natural environments have been altered, degrading the farming that
seven out of 10 East Africans rely upon for food and income.
Then
there is the expectation that the extractive sector will create more
jobs than others despite direct employment creation being relatively
low. For example, Total’s exploration and production global workforce in
over 50 countries in 2017 was just over 13,000 employees, while
Tullow’s total global workforce in 2017 was just over 1,000 employees.
Treating
the extractive sector as a solely export-oriented enclave will result
in few multiplier benefits accruing to the national economy. There must
be a link to agriculture, health and human resources.
Countries
in the region need not only local content policies but strategies for
value addition for each mineral or extractive resource.
The
Africa Mining Vision is an important template in this regard and
provides a good foundation for harnessing the potential of not just
mining, but the petroleum sector.
Lessons from across
the continent also demonstrate that it is easier to default to poor
management of extractive resources. For example, contracts setting out
the terms and conditions under which the resources will be exploited can
be too technical, particularly where the sector is new, limiting
governments’ ability to set optimal terms for taxation, local content
and accrued benefits.
Publicly negotiating and
disclosing contracts gives little incentive for corruption. Citizens’
expectations are also managed and there is better understanding of what
is in it for them.
Availability of comparable data slows the “race to the bottom” as countries cease to lower tax rates to attract investment.
Regional protocols
Illicit financial flows can also compromise government revenue through mis-pricing and under-invoicing.
Multinational
companies take advantage of low tax jurisdictions or tax havens to
minimise their tax obligations. a “leaking bucket“ where full revenue
benefits are not captured in the country of operation.
Contracts
need to be well negotiated to prevent potential leakages. Transparency
and accountability over rent receipts and establishing clear spending,
investment and saving rules could go a long way towards ring-fencing
revenue.
Regional strategies or protocols on
extractives could also help develop a shared vision for sectoral
development in the region. Ecowas has a Mining Policy and Directive
while SADC has a Mining Protocol.
A shared vision
averts a race to the bottom by clearly setting out minimum conditions
for resource exploitation and ensuring that there is consideration for
spatial linkages and infrastructure sharing in the region.
People
relate to what they understand. An informed and engaged citizenry is a
critical watchdog in transparency and accountability. We could learn
from Ghana for instance, and its Public Interest and Accountability
Committee, an independent statutory body.
East Africa’s
extractives industry is still nascent. There is still time to get
things right. But we must learn from others on the continent and beyond
how best to manage these potentially transformative resources.
Peter Kamalingin BL is the deputy regional director of Oxfam in the Horn, East and Central Africa.
No comments :
Post a Comment