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In many Central African countries, oil has become a poisoned gift. Instead of benefitting from this ressource, many countries are undermined by the effects of corruption and clientelism.
In 1992, during the electoral campaign, the Congolese President Pascal Lissouba wanted « to transform Congo into Switzerland ». Two decades later, his promise has left a bitter taste. In this small oil-state, half of the population lives below the poverty line and the country was ranked at the 140th place in the UNDP human development indicator. Switzerland seems like a faraway dream.
However, on paper, Congo seems like a dreamland, as would think former President Pascal Lissouba. The country has a 5 % growth rate, over 4 million population, a big tropical forest around the Congo Basin in the north of the country, a coastline in the south-west, the majestic Congo river in the East, an ideal climate for agriculture and of course oil. With an estimated production of 263 000 barils per day, the precious black gold is at the heart of the Congolese economy. It represents 60 % of the GDP, 75 % of the public revenues and 90 % of the exports. This is exaclty where the problem lies.
As a matter of fact, many countries in Central Africa such as Congo-Brazzaville, as well as Equatorial Guinea and Angola are affected by the « curse of natural ressources ». British economist, Richard Auty, coined the phrase in 1993 to describe this paradox. The abundance of natural ressources has the opposite effect. Instead of encouraging growth, it slows down the economic development. However, other countries that are less priviledged by nature are much more efficient economically.
Many political and economical explanations have been found to explain this situation. Oil (as well as other natural ressources) relies on a « rent economy », thus transforming the political game into a fight for ressources. In a recent article*, political expert Michael Ross associates three direct consequences to this situation. Oil rents support the authoritarian regime, promote corruption and clientelism and cause conflicts and civil wars (in Congo-Brazzaville and Angola for example).
Oil does promote a fast and relatively high economic growth. However, it makes the countries more vulnerable and more dependent on the volatility of oil prices. The appreciation of the currency can also have a negative impact on the exports in other sectors. Thus, imports will be favoured to the detriment of the development of the national production and diversification of the agriculture and industries.
A poisoned gift
If there are no institutional control or strong safeguard, oil can indeed become a poisoned gift. « The countries that depend the most on oil are the least democratic, the most corrupt and have the highest inequalities », bluntly states Marc Guéniat, survey officer for the Berne Decalaration (a Swiss NGO that analyses and identifies the role of Swiss traders in African oil-states). «If not a direct link, we can say that there is at least a correlation between oil and lack of democracy. However, some oil-states like Norway are models of democracy. »
Oil rents support the post colonial and neo-patrimonial African State. In this model, the ruling class mixes up public property with private interests and uses power to accumulate all the wealth shared by a small and priviledged class of people. A recent case of illegal assets under investigation in France involved Gabon, Congo-Brazzaville, Equatorial Guinea and Angola. Heads of State and their close relations and children are also involved in cases of concealment of stolen assets and accumulation of luxurious goods (mansions, appartements, vehicles) that are not justified by their positions and their declared income.
In these countries, the people who manage the oil sector and the economy are generally very close to those in power. For instance, in Congo-Brazzaville, Denis Christel Sassou Nguesso, son of the current President and deputy of the Oyo district, is also the Deputy General Director of the oil sector downstream of the National Oil Company (SNPC). In Angola, President Eduardo dos Santos' children also hold key-positions. Isabel or « Princess », the eldest one, is ranked by Forbes as the richest woman in Africa. She holds shares in many companies in Angola and Portugal. José Filomeno, her brother, manages the sovereign wealth of the country. Teodorin Obiang, involved in recent cases of illegal assets, is currently the Defence Minister and 2nd vice-president of Equatorial Guinea.
« One group of people controls the central bank in these States. They think their country is a playground. There are many latent conflicting interests, in Congo-Brazzaville for instance. The director of the SNCP (company managing oil contracts) is Denis Gokana. He is also the founder of the main private oil company in the country, African Oil and Gas Corporation, and signs deals with the State », claims Marc Guéniat.
Treating the disease
What are the solutions for this dreaded disease?
According to the Swiss researcher, the first and most important step is transparency. For him, "the public tenders should have clear and precise criteria. All the financial statements of public oil companies must be published. At the moment, the actions of these companies are very unclear. The financial statements of these companies are nowhere to be found. In other countries such as France, it would be unthinkable for public companies to not publish their financial statements and report their activities".
The Extractive Industries Transparency Initiative (EITI) was launched in 2003 to gather companies, NGOs and States willing to respect the norms on the improvement the governance of natural ressources. The countries mentioned above are far from being the best example. Gabon was removed from the ITIE because there was « no significative progress » on their part. Equatorial Guinea applied to join in 2007 but could not become a member because they did not fulfill the elligibilty criteria. Angola did not want to join the Initiative. Congo-Brazzaville has joined the ITIE and significative progress has been seen by the civil society. The State has indeed published the 2013 report on 31st December 2014 on all the oil revenues and its importance in the country's economy. The civil society claims that there is still a lack of transparency regarding some contracts, especially with Chinese partners.
In the long run, the reinforcement of the counterpowers and institutions is the solution. The oil found recently in Ghana should be beneficial to the country, according to researchers Dominik Kopinski, Andrzej Polus et Wojciech Tycholiz**. After many alternations and a peaceful succession to power, democracy is solidly implanted. The economy in Ghana is diversified and the civil society is very vigilant and demands a proper legal framework for the exploitation of oil. Thus, the country should be protected from the « disease of oil ».
Botswana is yet another example. The country's diamond industry is very successful. Even before this industry developped, the country had very stable institutions. Political leaders were determined to favour the national interest over any tribal interests. The authorities implemented transparent rules, such as the transfer to the public authorities of the tribes' rights to exploit mining industries. The budget is also managed responsibly. The diamond industry cannot fund any of the public expenditures.
The « natural ressources disease » is thus, nor automatic nor untreatable. As say World Bank experts Alan Gelb et Sina Grasmann***, « poppy seeds are not responsible for heroin addiction. The most important thing is to strengthen the people and the institutions in the exploitation of natural ressources».
The challenge here, is to use oil revenues as a lever for redistribution and investment in order to diversify the economy and develop education and health system. This challenge is huge but necessary for these countries where the youth is eager for a good education, employment and opportunities. The oil sector, alone, will not be able to take up this challenge.
Translated by Bushra Kadir
*Ross, Michael L., What Have We Learned about the Resource Curse? (June 20, 2014). Link: http://ssrn.com/abstract=2342668
**Kopinski Dominik, Polus Andrzej et Tycholiz Wojciech, “Resource curse or resource disease? Oil in Ghana”, African Affairs, 112/449, 583–601
***Gelb Alan, Grasmann Sina, « Déjouer la malédiction pétrolière », Afrique contemporaine 1/ 2009 (n° 229), p. 87-135
URL: www.cairn.info/revue-afrique-contemporaine-2009-1-page-87.htm.