Oil and Gas Boom in East Africa: Avoiding the Curse

Recent discoveries of oil and gas reserves in East Africa—specifically in Mozambique, Tanzania, Uganda and Kenya—could potentially transform those economies. If well managed, these resources could be pivotal in meeting the huge infrastructure deficit that characterizes the region and, indeed, the continent. Furthermore, the resources could form the basis of agricultural transformation and also investments in key aspects of human capital such as education and health. The resources, therefore, present a great opportunity to sustain high rates of growth in the region and accelerate job creation.

But there is little relationship between resource endowments and economic growth and development.   Many African countries that are richly endowed with natural resources are also among the poorest—Nigeria, Equatorial Guinea, Angola and the Democratic Republic of Congo, to mention a few.  These countries are also characterized by large inequalities in the distribution of income.  Furthermore, natural resources have more hindered than contributed to economic transformation, and these countries have become overly dependent on commodities. In addition, a number of these countries have been marked by costly civil wars mainly fueled by the desire to control those resources.   For many of these countries, natural resources endowments have been literally a curse. 

However, natural resource endowment need not be a curse. For example, Botswana has shown success in utilizing its natural resources for the development of the country. 

The link between natural resources and development is governance. Without appropriate institutions of governance that ensure accountability and transparency, natural resources endowments are unlikely to translate into positive developmental outcomes.  The new oil and gas economies in Africa have examples from which to learn and can choose whether to follow a path that leads to a curse or blessing.  Initial evidence seems to show that, although the implications of poor governance are well-known, some of the new oil and gas economies may be headed in the wrong direction.   But this treacherous road can still be avoided before the exploitation of their resources commence. 

Given the great potential that natural resources hold for economic development, the Africa Growth Initiative (AGI) at Brookings has prioritized natural resource management.  Working with think tank partners in Africa and other actors, AGI hopes to contribute to the informed debate on natural resource management through independent research and events exploring and addressing the topic.  Our ultimate goal is to contribute to the establishment of institutions of governance that ensure accountability and transparency in the management of natural resources.

 On February 20, 2014 the Africa Growth Initiative (AGI), in partnership with Oxfam America, will hold an event that will explore the impact of the major recent oil and gas discoveries in East Africa.  As Kenya, Mozambique, Tanzania and Uganda—among other new and existing energy producers in Africa—face critical decisions on how best to manage these valuable resources, AGI and Oxfam are providing evidence-based policy recommendations for national, regional and international actors and policymakers.

The February 20 event at Brookings will feature three panel discussions among key leaders from civil society, the private sector, government and academia. The day’s premier discussion will include the chairman of Tullow Oil, Simon Thompson; U.S. Department of State’s special envoy and coordinator for international energy affairs, Ambassador Carlos Pascual, and lecturer on African politics at Oxford University, Ricardo Soares de Oliveira, discussing key regional and international implications of these vast natural resources. The event’s opening panel will explore the new discoveries’ potential bearing on human rights, the environment and conflict in the region. The remaining session will focus on the potential economic impact to be harnessed via the effective management of these resources. The exchanges of ideas and best practices mentioned over the course of the day will provide vital information for all stakeholders, from local communities up through the global stage.

The high-level private event on February 20 will be webcast, and we hope to continue the conversation here on our blog and on Twitter using the hashtag #AfricaOilGas in the coming weeks and months.

To read more about the regional symposium on natural resource management AGI co-organized in Kampala, Uganda in 2013 with its think tank partners, see here, and for a brief summary of related AGI research being conducted in West Africa, read this blog post.  Also, Oxfam is launching a new report on these critical issues, entitled “Free, Prior, and Informed Consent in Africa: An emerging standard for extractive industry projects,” at our joint event here at Brookings, and the full text can be found here.

Most importantly, please stay tuned to this space for more information about AGI’s ongoing research with its partners, key takeaways from event on Africa’s oil and gas boom, and further developments on natural resource management issues in Africa.