30 December 2012

Uganda: There Will Be No Curse If Oil Is Wisely Used


The United States Geological Survey recently estimated that East Africa may have as much as 28 billion barrels of oil and 440 trillion cubic feet of natural gas.

If this were proven true, it would fundamentally change the global energy outlook. According to Reuters, the East African cash prize may be up to $9 trillion, requiring an investment of $100bn in the region. Given the above estimated huge quantities of oil and natural gas resource, one would then say that indeed the 'Oil Curse' is upon us!

However, given the level of political and economic stability, I believe Uganda is hundreds of miles away from the so-called oil curse as compared to some other countries that are still mired in leadership problems. How can we, on the other hand, avoid this curse? What did Botswana and Norway do that Nigeria and Sierra Leone did not?

To start with, we should distinguish between countries that are rich in natural resources and countries that are dependent on natural resources. Some countries are resource-rich and others are resource-dependent. Take Botswana, for example. In 1966 when it got independence, Botswana was a small desert country. It was one of the poorest countries in Africa. Its GDP was $64. Today its GDP is around $9,500.

So many people see Botswana as an exception to the resource curse. I think the management of that state has been fantastic. However, it is important to note that Botswana is also resource-rich. It is one of the largest producers and exporters of diamonds in the world. This earns it about $1,500 per citizen, annually. Then look at Sierra Leone.

This is a country that is now famous for giving the 'blood diamonds' their name. These earn them about $30 per citizen, annually. So, if you were to get Sierra Leone's diamonds, for which there has been much bloodshed, and pay each citizen a monthly salary, you would pay them the sum of $2.50 (Two dollars and fifty cents per month).

Look at Nigeria. It has a population of about 160 million and it produces two million barrels of oil per day. That is one barrel for every 80 citizens. But then the oil is shared on a 50-50 basis between the government and the oil companies. That means in actual fact Nigeria produces one barrel of oil for every 160 citizens. That is under one litre for every citizen. With that one litre, the state of Nigeria has to spend on providing healthcare, infrastructure, education, security, etc, for one citizen.

By contrast, Saudi Arabia, with 24 million people, produces eight million barrels of oil. That is one barrel for every three citizens. Clearly, from their oil, the Saudis have enough money to provide cheap fuel, build roads, schools, hospitals and a palace for the prince. The people of Sierra Leone who got two dollars fifty cents a month or those of Nigeria who earn less than one litre can not in any language be described as 'resource-rich.'

Therefore, when NGOs, scholars and political actors talk about the "paradox of plenty", I think they are greatly mistaken. One litre is not really plenty. We should stop imagining that merely finding resources makes us resource-rich. This lack of perspective has caused a multitude of problems in many African countries. People think they are resource-rich when they have only one litre of petroleum products per person.

We must make sure that we don't become resource-dependent. Instead, we must use any available oil revenues to enhance the other productive sectors of our economies. These should include areas like agriculture, electricity, infrastructure, etc. Ultimately, the greatest resource we have is our human resource. Countries that have harnessed this resource have prospered. Let's be careful not of that.

The author is General Secretary of the NRM Parliamentary Caucus.

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