The Oil curse and Blessing in Africa

One of the recent things that have taken Africa by storm is its discovery of oil and gas resources in the most recent past. Tanzania, Uganda, Sudan, Kenya are some of the most preferred destinations for oil exploitation on the continent at the moment. West Africa’s reserves were part of the earlier discoveries and with the example set by the states in that part of the continent paints a grim picture for us all.

And as a result phrase has been coined. Do all oil discoveries turn into the oil curse rather than blessings in Africa? This is because Africa’s history with such rich resources does not favor it. Majority of the countries with oil have turned out to be insecure, war ravaged territories because of the greed and corruption that comes with these developments.

But what does the discovery of Oil mean for East Africa, which has the newest reserves and the continent as a whole?

With oil discovery in Uganda, the country could become a key global producer with about 3.5 billion barrels reported to be discovered close to the border with the Democratic Republic of Congo.  The oil resources if very well exploited is key to the region. They would go a long way in providing fuel and energy at lower costs etc. However we already have discrepancies coming up in the region about the oil resources.

The other regional oil dispute is the situation in South Sudan and Sudan. South Sudan is now home to about 75 % of the oil reserves that once belonged to Sudan. The conflicts that have all taken place since then are believed to be a result of that. What is even more interesting to note, is that while South Sudan owns the oil, it must pay Sudan transit fees when transporting the oil through Sudan. Both depend heavily on the oil.

The Niger Delta has been a source of conflict which has been a long standing one. The Niger Delta holds some of the richest oil deposits in the world. According to the BBC, very few people have benefited from the oil wealth in the country. It still has 45% of its population living below the poverty line and is in public debt. It is the eighth largest oil producing country.

All these situations new and old pose a serious question of what the future of Oil in Africa will be. Will we ever be able to share and live together as one even in the midst of this wealth? Or should we give up on hope because the future remains grim?

Countries with oil production have something similar in that their economies are heavily dependent on oil, for example, the Democratic Republic of Congo [DRC] Sudan and South Sudan. ¹According to Eustache Ouayoro, the World Bank Director in an interview early this year, the oil industry for the DRC accounts for 70% of GDP, 90% of exports and 80% of the revenue. There is need to diversify in the sources of GDP for the country. This seems to be the case with Sudan and South Sudan as well. South Sudan relies on oil for 98% of government revenue and has no alternative to this current arrangement. Sudan relies on the transit fees paid by South Sudan for using its pipelines, refineries and export terminal at Port Sudan. If African economies are going to flourish in the future, then they need to diversify.

However the future of oil producing countries is not all grim. There is hope. ²The steady revenue that comes from the oil offers a lot of significant and potential benefits to the countries. The revenue can be used to develop and diversify the economies through investment in social and physical infrastructure as says Dr Adana Shihab-Eldin, the then director of research at OPEC. In 2005, he said that there were potential advantages at a boarder and international economic level whereby petroleum revenues can contribute towards providing funds required for investment in future oil production. Seven years down the road, whether this was looked into and adapted by the various countries is a mystery, but it is still adaptable for years to come.

³Research done by the UK Energy Research Centre (2009) which is summarized in Sorrell and others (2010) shows that based on a wealth of geological and engineering evidence, there is a risk of a peak in conventional oil production before 2020. However there could be an inexorable decline thereafter. This means that there is enough to go round for all of us. As the production rises so will the demand. The more we have the more there is for us to share. Oil production can be a blessing. It works better for us that way.

The power to make it work lies with all of us that would love a peaceful and shareable economy for all. Can we make it work?

¹ Congo Must Diversify its Economy and Think about the Post-Oil Era
http://www.worldbank.org/en/news/feature/2013/01/18/congo-must-diversify-its-economy-and-think-about-the-post-oil-era
² Global Oil Outlook, future economic development and investment requirements for OPEC Countries
http://www.opec.org/opec_web/en/press_room/896.htm
³ Oil and the World Economy: Some Possible Futures

Ruth Aine Tindyebwa
Blogger/Online Communications

Read her personal blog; IN DEPTH which is at www.ruthaine.com

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