Help not hinder Africa
Oil in Africa has a bad press—but it needn't be that way, argues a new book
Books on oil in Africa, even the good ones, seem unavoidably to be tales of looting and corruption, poverty and ecological degradation. Spend long enough reporting on energy in the continent and the notebook fills with tales: the minister who demanded hundreds of millions in kickbacks to let a corporate deal go ahead; the company that dumped its toxic materials in the bush thinking no one was looking.
A new book*, by energy lawyer NJ Ayuk and analyst João Gaspar Marques, takes a different tack. It's not another story of how things have gone wrong, but a gentle polemic—by way of case studies from different producer-countries—about how to make things right.
It's a refreshing approach. The book "aims to avoid the wholesale demonisation of the industry and attempts to reveal the potential benefits that oil and gas exploitation can offer the people of Africa". The evidence makes clear, they say, that "responsible and sustainable development of these resources is not only possible, but may be the quickest and most effective route to peace and prosperity for these nations".
That's not to say the premise won't raise some eyebrows. Oil in Africa has had a rough time lately. Insurgents in the Nigeria's Delta region have struck energy installations repeatedly in the past 18 months, sometimes cutting a quarter of the country's oil output. In Libya, a civil conflict has been underway since 2014—all sides wish to capture key strategic oil assets, and in the past six months the country's prolific Sirte Basin has changed hands three times. East Africa has suffered neither of these kinds of calamities, but it has failed to fulfil the promise of big oil and especially offshore gas discoveries.
Big Barrels is more descriptive of successes and where things are improving. The conclusion of the Nigeria chapter—full of detail about local-content rules designed to bring more Nigerians into the oil sector—ends with optimism. Ethnic tensions will diminish, the authors write, "as local content and improved wealth distribution policies are implemented successfully". This is surely true—but it has been the case now for many years. Almost unmentioned is the rampant corruption that has scarred Nigeria's oil sector and robbed its citizens of their due. The authors say this theme is amply covered elsewhere. Still, it feels awkward to step around the oily elephant in the room.
The book is full of praise for Equatorial Guinea's economic achievements, including a 160-fold rise in GDP, since oil and gas production began. "The industrial, economic, financial and political transformation the nation has undergone over the past 20 years has been nothing short of incredible, a change mostly brought about by its oil and gas discoveries," the book says.
Writing of Equatorial Guinea's President Obiang Nguema—re-elected as president for a fifth term with 94% of the vote in 2016's ballot—as having brought "political stability which had not been seen since colonial times" will also make some readers sit up. The US State Department's assessment isn't quite so cheery, mentioning threats to torture diplomats, deadly force used against political dissidents and other misdeeds—and that report comes from the country's long-standing ally. The book does not mention the 2004 attempted coup.
Likewise, the success of Angola's Sonangol is down partly to its management's "complete isolation from the politics of those in power". Yet last year President José Eduardo dos Santos appointed his daughter, Isabel, to run the company.
The authors anticipated these quibbles, saying openly—and fairly—that their book is about the potential for things to be done right (and not about abuses covered extensively elsewhere). Ghana offers the book's most positive case study. A free press, involved civil-society groups, political scrutiny and the government's willingness to take advice from Norwegian officials have all fostered the "golden child" of the continent's oil producers. Tullow Oil's developments have not overwhelmed the country's economy or injected Dutch Disease. Agriculture and services remain strong contributors to GDP, the authors note.
East Africa will be the next testing ground for the book's ideas about how oil and gas development can help, not hinder, economies when the hydrocarbons start flowing. Expectations need managing. The authors note that in 2015, a poll showed that 17% of Tanzanians expected to get a job in the gas sector. Few will, and full-scale development is some way off anyway. For all the efforts at institution-building and legislative development in Tanzania, perceptions of opaque rules linger on, among citizens and investors. You can't, say the authors, "underestimate the value of good governance and transparency". For Mozambique, "procedural integrity, transparency and ease of doing business contribute much more" to attracting inward investment "than any tax holiday would".
New developers at least have time on their side. The collapse of oil and gas prices means the rush to develop new resources in Africa has abated. Mozambique's and Tanzania's liquefied natural gas ambitions must work in a world now long on LNG but with shallow pockets and short of investors keen to spend heavily on big gas projects. Until that changes, planners should learn from failures and successes elsewhere on the continent. They can start by reading this book—the product of genuine expertise and a worthy antidote to the common ailment that depicts oil in Africa as a blight to which Africans themselves are always helpless.
* Big Barrels: African Oil and Gas and the Quest for Prosperity. Clink Street, London: 2017