New Vision (Kampala)
Prof. A.B. K. Kasozi
21 October 2009
opinion
Kampala — In a bid to stimulate the debate on Uganda's newly discovered oil and the sharing of the oil wealth, Business Vision runs a series of articles by Professor Kasozi, the director of the National Council for Higher Education.
This week's article focuses on the possibility of Africa overtaking Middle East as an oil exporter and area of autocracies and conflict.
A number of shallow thinking people speculate that Africa may overtake the Middle East as a major exporter of oil in the not far distant future.
They argue that Africa will also have the good material abundance the people of the Middle East enjoy.
A colleague who just returned from the Middle East told me how happy he was to be in one of the countries of the Middle East driving on double-lane roads with no boda boda cyclists who know no traffic rules. He found well-stocked shops, malls and stores in that country.
He was amazed by the easy access to excellent social welfare facilities, the skyscrapers and the absence of thieves and pick pockets.
To him and many others of his type of thinking, it is oil that has brought all the abundance and Africa should work hard to exploit and export its oil in order to give its people the same abundance as the people in the Middle East.
However, though oil has brought abundance to the Middle East, it has also brought problems to the area. These should be avoided by Africa.
But, is Africa likely to overtake the Middle East in oil production and export?
Although sub-Saharan Africa is now acknowledged to be the fastest growing oil producing region, it will be a while before it overtakes the Middle East. Production in Africa has risen by 36% since 1995 compared to a world average growth of 16%. Consequently, the total revenue Africa has reaped is enormous.
Between 1995 and 2005, the total revenue of the largest sub-Saharan countries was about $35b. These include Nigeria, Angola, Sudan, Gabon, Congo (Brazzaville), Chad, Equatorial Guinea and Cameroon. Estimates are that oil contributed an average of 24% to GDP of those countries in 1995 to 2005.
The growing oil production importance of sub-Saharan Africa is further evidenced by the presence of the oil companies from both the West and the emerging East.
The western majors that are present in sub-Saharan Africa, especially in the "armpit" region (from Ivory Coat to Angola) include Shell, Total (Fina-Elf) and Chevron. These oil majors (companies) have been joined by Asian ones-- indicating the changing global power structure.
Asian companies getting or searching for oil in Africa include Petronas (Malaysia), ONGC Videsh (India) and the Chinese National Oil Company. It is, therefore, true that Africa is increasingly becoming important as an oil exporter. However, the Middle East has seven times as much known oil reserves as Africa.
By January 2009, the Middle East was estimated to have 745,998 compared to Africa's 117,064 billion barrels of oil reserves.
On the other hand, big chunks of African territory have not been surveyed. Africa might have more oil reserves but to replace the Middle East as an oil producer will take Africa years. The greatest fear of thinking individuals is that as oil production increases and the African continent looks to the Middle East as a friend and comrade-in-oil-export, the continent may also experience the effects the possession of oil by traditional and politically underdeveloped societies has brought to the Middle East.
These include political retardation manifested by lack of democracy and governance by autocracies, excessive militarisation of states, failure to industrialise or modernise, strengthening of colonial trading relationships with oil importing countries and abuse of human rights.
Possession of oil by countries, whose political systems have not developed democratic participatory structures, retards democratic behaviour by strengthening elites who control the state.
Because money flows directly to the controlling elites, political and monitory power concentrates in the hands of the strongmen, kings or sheikhs who control the sate.
Due to the enormous amount of money these autocratic leaders possess, opposition and the whole population can be bought by eliminating all forms of taxation, massive welfare benefits and outright buying out of opponents. This is true in the Middle East oil producing counties where life presidents, kings, and sheikhs reign.
Oil majors and their nations negotiate and relate directly with governments and cut out populations as represented by their elected officials (if any). Middle East oil producing countries are known for their strong men, not by their democratic institutions.
Popular leaders who try to make the exercise of oil exchange transparent like Mohammed Mosadeq of Iran are hounded. Oil buyers prefer to deal with compliant and internally strong (repressive) leaders. The only countries in the Middle East where people elect their leaders within the context of their laws are not oil exporters. These are Lebanon and Israel. For oil revenue to increase political development, the bedrock of social development and transparency is a necessity.
Unfortunately, the bitter fruits observed in the Middle East are replicating in Africa.
Autocratic governments have, or are, ruling most of the African oil producing nations. Nigeria was ruled by the military for 23 years between 1966 and 1993.
African oil producing countries of Equatorial Guinea, Chad and the Republic of the Congo (Brazzaville) have some of the most undemocratic regimes on earth.
They have already gone the way of the Middle East in retarding the participation of the people in the governance of their countries.
The Angolan and Sudanese regimes have controlled participation of the people in governance, just like Egypt in the Middle East. The latter are not full democracies.
Excessive militarisation and the use of a lot of oil money for arms instead of development is a direct consequence of the centralisation of political and military power.
To control oil revenues, autocratic regimes use bullets not votes for staying in power. The Middle East is one of the great per capita importer of arms. The region had 9.9% of global arms imports in 1963 and by 1974, the percentage was 36% (about $45b).
African oil producing countries are already behaving like their Middle East counterparts in this respect. Regimes in Chad, Equatorial Guinea, the Republic of the Congo (Brazzaville) and Sudan spend enormously on arms, which are not all for external combat but mainly for internal defense of those in power. One of the tragedies of the Middle East has been its failure to industrialise. This has made the area an exporter of raw materials and importer of value added goods. Although, some countries like Saudi Arabia have began to implement industrialisation policies, others do not rank high as manufacturing nations.
There are many questions to ask: Why did the Asian Tigers, with less money than Middle East countries, overtake the latter in industrial development in the last 50 years?
Part of the answer is the false sense of security, overconfidence, arrogance and illusions that massive inflow of capital creates in the benefiting individuals and nations. This sense reduces effort and human endeavour, leading to social stagnation.
Export of oil has linked the Middle East to western importing nations in a tight colonial relationship, the revoking of which can lead to dire consequences. Any local leader who tries not to do to so is described as a "rogue". The sell of oil is for the world market rather the needs of domestic sustainable development.
Large amounts of oil exports leads to over-evaluation of the national currency as imports surge. In turn, this leads to a decline in production and export capacity, which, in turn, weakens the domestic economy; eventually tying it to the Metropolitan one in an unequal colonial-like relationship.
The control of oil, delivered in colonial-like trading relationships, explains the presence of many conflicts in the Middle East.
The Middle East is one of the most conflict-ridden area in the world, despite the abundance of oil money, social welfare benefits, material abundance and external show of happiness. Africa should not go through the same path. Unfortunately, most of the African oil producing nations of Nigeria, Equatorial Guinea, Angola, the Republic of the Congo have already been infected by conflicts
Lastly, the Middle East oil producing countries are not known to confer human rights benefits to their populations. Freedom of constituting and sacking governments and leaders of other political structures, of speech or association are limited in most of the Middle East countries. As noted earlier, citizens are almost "bribed" to be quiet by massive welfare benefits. Without paying taxes, citizens have no strong reason to pressure governments for human rights. As there is often no fiscal connection between the people and the government in form of taxes, the role of the state in a number of oil producing Middle Eastern countries is to manage oil revenues and to provide welfare benefits. National budgets are often limited to expenditure lists. For the incumbent rulers, the aim of politics is to keep themselves in power for the enjoyment of oil revenues.
Africa should pursue a different course in using its oil revenue from that trodden by Middle East countries. The material abundance not withstanding, the Middle East is a politically backward area where populations do not participate in making decisions affecting their lives, nations and cannot change their political institutions without violence.
Africa must chart its own course. The African Development Bank's "Ways of Using the African Oil Boom for Sustainable Development, 2006" and the "National Oil and Gas Policy for Uganda, 2008" are a good theoretical start for the long journey ahead.
Prof Kasozi is the Executive Director of the National Council for Higher Education
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