Will Africa be cursed by oil again?
By Eurasia Group analyst Philippe de Pontet Major new oil finds in Uganda, Ghana, and Sierra Leone could bolster government revenue, finance social spending, and lift entire communities out of poverty — or not. The resource curse is about to be put to the test again in Africa, as each of these recent discoveries have ...
By Eurasia Group analyst Philippe de Pontet
By Eurasia Group analyst Philippe de Pontet
Major new oil finds in Uganda, Ghana, and Sierra Leone could bolster government revenue, finance social spending, and lift entire communities out of poverty — or not. The resource curse is about to be put to the test again in Africa, as each of these recent discoveries have the potential to produce upwards of a billion barrels of crude. If the past is any indication of things to come, these countries may live to rue the discovery of black gold. But if they study the cases of other oil-cursed African nations — Nigeria, first and foremost — they may learn how not to manage the windfall.
It has been 40 years since oil was found in the Niger Delta. Four decades, $80 billion, and 134 billion barrels later, living standards have actually fallen, amid environmental decay, rampant corruption, and a succession of rebel groups that seem to get more violent with each new incarnation. Many Nigerians are now convinced that true economic and political development will only come after the last drop of oil has been pumped, not an imminent prospect for a country with more than 30 billion barrels in reserves.
In the meantime, instability, the threat of sabotage, and oil bunkering have taken offline half of the country’s production capacity — which totals nearly 3 billion barrels per day — and multinationals such as Shell are seriously considering leaving. Angola, which currently chairs OPEC, has dethroned Nigeria as sub-Saharan Africa’s top oil producer and China’s most dependable supplier. Nigeria’s downward trend is likely to continue over the next 18 months as the election campaign heats up, unleashing a new cycle of rent-seeking unrest in the Delta. If oil prices continue to rise and global inventories tighten, Nigerian supply risk could again become a driver of price spikes and volatility as in 2007.
Of course, Nigeria is not the only resource-cursed nation on the African continent — it’s just exhibit A. On a smaller scale, the governments of Chad, Equatorial Guinea, Sudan, and Gabon have all squandered billions of dollars in oil revenues, with more money ploughed into Swiss bank accounts and Mediterranean villas than into their own economies. Gabon’s recently deceased leader Omar Bongo amassed about a dozen palaces in France during his 40 years in power — properties that will be inherited by Gabon’s new President Ali Bongo if they aren’t confiscated by French courts.
In Chad’s case, a World Bank-mandated escrow account and strict 80 percent earmark for social spending are not enough to prevent President Idriss Deby from turning the revenues into his own bank account and financing vehicle for war. Less perfidious, perhaps, but just as destabilizing in its own way, is the case of southern Sudan, where oil provides more than 95 percent of government revenues and less than 2 percent of jobs. Oil literally sucks the oxygen out of the economy and undermines other sectors, such as agriculture, where most people actually work, while turning the government into a rent-seeking enterprise.
Turning back to the newest members of the oil club, Uganda, Ghana, and to a lesser extent Sierra Leone are for now relatively well-governed and reform-oriented nations at peace with themselves and their neighbors. Ghana and Uganda are among Africa’s perennial donor darlings — if any countries have a shot to break the curse, these are good candidates. Sierra Leone has come a long way since the 1990s when the country was practically synonymous with the phrase "blood diamonds." Sierra Leonians voted the opposition into power last year in free, fair, and peaceful elections (much like Ghana).
What will oil wealth do for (or to) these countries? It’s hard to say, but maybe Ghana, Uganda, and Sierra Leone can break the resource curse–at least they have clear models not to follow across the continent.
Ian Bremmer is the president of Eurasia Group and GZERO Media. He is also the host of the television show GZERO World With Ian Bremmer. Twitter: @ianbremmer
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