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Natural resources

The oil curse

by Susanne Giese
Next year, Ghana and Uganda will start to produce oil. Prolific oil fields are promising high revenue and prosperity. However, some other African oil regions such as the Niger Delta or Southern Sudan are marked by violence. An African research network wants to work out ways to avoid what is commonly called the “resource curse”. [ By Susanne Giese ]

Juan Pablo Pérez Alfonso, Venezuela’s minister for mines and hydro-car­bonates from 1959 to 1963 and OPEC co-­founder, coined the phrase: “You will see oil will bring us ruin … oil is the devil’s excrement.”

Indeed, oil has often proved to fuel violent conflicts. Other unwelcome consequences of oil exploitation are the destruction of the environment and local people’s loss of livelihoods. Oil exports drive a country’s exchange rate up, stifling growth in other sectors. Petrodollars make ruling classes independent from both their nation’s welfare and international aid.

There is abundant proof of oil fields and the development of prosperity being negatively correlated. In Angola, Africa’s second largest oil exporter, 70 % of the people live on less than one dollar per day; in oil-rich Chad, the share is around 80 %.

In Angola and Sudan, GNP per capita is growing faster than the Human Development Index, as Alison Goldstuck from the South African Institute for International Affairs (SAIIA) points out. In Ghana so far, it is the other way around. Goldstuck presented these data in January 2010, at the launch of the Governance of African Resources Network (GARN) during a conference in Accra.

Supra-regional research network

The objective of this network, founded by SAIIA and the Centre for Democratic Development (CDD-Ghana) in cooperation with partner institutions from Tanzania, Angola and Uganda, is to pool African research capacities and actively promote the dissemination of results. According to ­Victor Brobbey, research fellow at the
CDD-Ghana, the majority of research projects on African extractive industries are planned and implemented outside Africa, notwithstanding the continent’s abundance of natural resources.

Kathryn Sturmann of the SAIIA considers it an indispensable necessity for Africa to break free from the dependence on foreign sources of information. Indeed, constantly looking North is diverting attention from African countries and their needs in regard to abundant natural resources. When drafting national oil legislation, many African governments are inspired by the successful way Norway manages its oil resources through a sovereign fund that is geared to serve that nation’s welfare. However, countries with fragile statehood or an autocratic concentration of power cannot simply copy the Norwegian model.

The same resource-rich African countries could learn a lot from one another, however. At the launch of GARN research network, participants came up with a lot of questions. Light was shed on many aspects that may help to understand how the curse of abundant natural resources comes about – and how it may be prevented.

Alex Vine, head of the Chatham House Africa Programme, compares the policies of Nigeria and Angola: both countries want to fund infrastructure development by selling oil production rights to Asian countries. The public Angolan oil agency ­SONANGOL is professionally and successfully negotiating and managing oil-backed loans via a system called the “Angola mode” by the World Bank – for example, it concludes contracts where credits for infrastructure measures are paid back in commodities. In Nigeria, however, the government signed contracts many years ago, but still not a single barrel of oil has been produced – nor have any railway tracks been laid. This is what Alex Vine calls a “lose-lose situation” (Vine et al, 2009).

Fighting corruption with transparency

Another issue is to fight corruption with transparency: data on public revenues and payments of the oil companies should be published. This is the approach of the Extractive Industries Transparency Initiative EITI. EITI was started by Britain’s then Prime Minister Tony Blair in Johannesburg in 2002 and has since become a global standard for promoting revenue transparency on a local basis.

The Nigerian EITI (NEITI) has helped civil society establish a dialogue with the government. Uche Igwe, who represents civil society in NEITI, considers the initiative a good forum for dialogue. However, a lot of expertise is needed in order to conduct dialogue constructively and effectively. ­Igwe argues that “you can’t control what you don’t understand”. NEITI has strengthened the know-how of Nigerian civil society.

Thirty-two countries, of which 21 are African, have joined the initiative. Nevertheless, recent data is scant. At the Berlin meeting in April, the EITI Board therefore decided to strip two aspiring members of their candidate status and granted a deadline extension to 16 others. Chairman Peter Eigen said: “These decisions have ensured the credibility of EITI.”

However, Tim Hughes of SAIIA considers it a congenital defect of EITI that major commodities producers like the UK and Canada, Russia, China and Brazil are not represented. According to Hughes, EITI owes its existence “not to the oil companies, the governments or to Tony Blair, but to us, the civil society” as it pushes for more transparency and exerts pressure on governments and companies.

Who owns the oil?

GARN is investigating the conditions under which civil society can wield influence. In Accra, Peter Veit, Africa director of the World Resource Centre, showed what kind of laws can thwart the representational aspirations of civil society groups. There are different opinions as to the ownership of a country’s natural resources: Who actually owns the oil? Is it the indigenous landowners, private investors, the entire people, the government or the state? Should a part be reserved for the local governments? Which are the communities that legally constitute the “oil communities” suffering from the negative effects, and on what grounds can they demand compensation?

The control or natural resources is regulated differently in different countries. In Uganda, for instance, the Ugandan constitution of 1995 gave control of oil and land to the citizens, says Peter Veit. But the constitution did not mention oil and mineral resources, so an amendment of 2005 clarified that it is the government that controls them. This makes access even more difficult for civil society.

In Uganda, land ownership is regulated to 80 % by local traditions. If, however, land is bought and registered, it may be converted into “freehold.” According to Veit, land speculation is in full swing.

Oil fields fuel distributional fights

Traditional land law is also applied in Ghana. Awule Annor Adjaye, Paramount Chief of the oil-rich Western Zema Area (Jomoro West District), points out that the chiefs should refrain from selling land, ­given that they are meant to take care of it on behalf of their people and the next generation. He refers to a contradiction in the constitution of 1992: on the one hand, as stated in Article 267(1) and Article 270(1), according to traditional law, the chiefs hold land in trust for their people. On the other hand, Article 257(6) reads: “any mineral in its natural state under or upon any land in Ghana (…) any area covered by territorial sea or continental shelf is property of the Republic of Ghana and shall be vested in the president on behalf of and in trust for the people of Ghana.”

According to the constitution, the president is directly in control of natural resources such as oil. In the current debate over the reform of the Ghanaian constitution, civil-society groups like the CDD-Ghana demand that the executive’s vast powers be reduced.

Oil wealth can also lead to fights over distribution and even violent conflict. Kwesi Aning, head of the Department of Conflict Prevention and Conflict Management at the Kofi Annan Peace Keeping Training Centre in Accra, warns against hopes of high prosperity that might be deluded. Radical youth groups in Ghana’s Western Region and the numerous small arms in the country might yet turn out to be an explosive mix. He calls for a national policy on oil security and land use.

Many questions remain. The networking partners of GARN are planning ­to compare research data and deduce answers. According to Victor Brobbey, the network will also involve key figures from the government, politics, economy and the media. The objective is to develop and actively advocate policy recommendations that will serve as good governance of Africa’s abundant natural resources for the sake of its people.