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Africa: Bottom of the Barrel (Oil)
AFRICA ACTION
Africa Policy E-Journal
June 18, 2003 (030618)
Africa: Bottom of the Barrel (Oil)
(Reposted from sources cited below)
This posting contains the executive summary and brief excerpts from
the introduction to an important new report on Africa's Oil from
Catholic Relief Services released this week. The full report is
available at http://www.catholicrelief.org/africanoil.cfm
The report has case studies on Nigeria, Gabon, Angola, Congo-Brazzaville,
and Equatorial Guinea, as well as the Chad-Cameroon
pipeline. It also contains recommendations on policy beginning with
mandatory disclosure of payments as a basis for advocacy
for local citizens' groups. As with other recent reports, it
documents the perverse effects of oil wealth in blocking rather
than contributing to development, and calls for changes that would
allow income from expected massive increases in production in
coming years to be used productively for African development. .
Related recent news articles include:
Daphne Eviatar, "Striking it Poor: Oil as a Curse" (New York Times,
June 7, 2003)
Reports on critiques within the World Bank citing the
negative effect of oil and other extractive industries.
Charlotte Denny, "Scramble for Africa" (Guardian, UK, June 17,
2003).
Notes U.S. opposition to oil company transparency, and
British retreat from possible backing of mandatory disclosure
proposals.
Gregg Jaffe, "In Massive Shift, U.S. Plans to Reduce Troops in
Germany," (Wall Street Journal) June 10, 2003
In context of plans for redeployment of U.S. troops in coming
years, cites focus on "key oil reserves in Africa and the Caucasus
region." Journalist quotes unnamed U.S. officials as saying "a key
mission for U.S. forces would be to ensure that Nigeria's oil
fields ... are secure."
Ken Silverstein, "Pipeline's Profits May Bypass Africans" and
"AIDS Could Follow Africa Pipeline" (Los Angeles
Times, June 17 & 18, 2003)
On Chad-Cameroon pipeline. Health conditions along the pipeline construction are ideal for
spread of AIDS, say health experts. And the oil companies refuse
to accept responsibility.
Additional related reports and E-Journal Postings
Christian AID (UK)
Fueling Poverty: Oil, War, and Corruption, May, 2003
http://www.christian-aid.org.uk/indepth/0305cawreport/fuellingpoverty.htm
Includes reports on Iraq, Angola, Sudan, and Kazakhstan
Africa: Shell and its Neighbors, May 5, 2003
http://www.africafocus.org/docs03ej/shel0305.php>
Nigeria: Elections, Oil, and Violence, April 3, 2003
http://www.africafocus.org/docs03ej/nig0304a.php>
USA/Africa: Questions for Candidates
(includes references on U.S. & Africa's oil)
http://www.africafocus.org/docs02/ques0210.php>
Nigeria: Oil, Poverty, and Rights, July 9, 2002
http://www.africafocus.org/docs02/nig0207a.php>
http://www.africafocus.org/docs02/nig0207b.php>
+++++++++++++++++end summary/introduction+++++++++++++++++++++++
Bottom of the Barrel: Africa's Oil Boom and Prospects for Poverty
Reduction, A Catholic Relief Services (CRS) Report
Executive Summary
Oil Boom: Peril or Opportunity?
Sub-Saharan Africa is in the midst of an oil boom as foreign
energy companies pour billions of dollars into the region for the
exploration and production of petroleum. African governments, in
turn, are receiving billions of dollars in revenue from this
boom.
Oil production on the continent is set to double by the end of
the decade and the United States will soon be importing 25
percent of its petroleum from the region. Over $50 billion, the
largest investment in African history, will be spent on African
oil fields by the end of the decade.
The new African oil boom centered on the oil-rich Atlantic
waters of the Gulf of Guinea, from Nigeria to Angola is a
moment of great opportunity and great peril for countries beset
by wide-scale poverty. On the one hand, revenues available for
poverty reduction are huge; Catholic Relief Services (CRS)
conservatively estimates that sub-Saharan African governments
will receive over $200 billion in oil revenues over the next
decade. On the other hand, the dramatic development failures that
have characterized most other oildependent countries warn that
petrodollars have not helped developing countries to reduce
poverty; in many cases, they have actually exacerbated it.
Africa's oil boom comes at a time when foreign aid to Africa from
industrialized countries is falling and being replaced by an
emphasis from donor nations on trade as a means for African
countries to escape poverty. The dominance of oil and mining in
Africa's trade relationships, coupled with this decline in aid
flows, means that it is especially vital that Africa make the
best use of its oil.
CRS is committed to helping to ensure that Africa's oil boom
improves the lives of the poor through increased investment in
education, health, water, roads, agriculture and other vital
necessities. But for this to occur, these revenues must be well
managed. Thus, this report addresses two fundamental questions:
How can Africa's oil boom contribute to alleviating poverty? What
policy changes should be implemented to promote the management
and allocation of oil revenues in a way that will benefit
ordinary Africans?
Managing Petrodollars Well:
Presently, Africa's oil revenues are inserted into governments
lacking in transparency, accountability and fairness. Without
improving their democratic institutions and administrative
capacity, it is unlikely that African oil exporters will be able
to use petrodollars to fuel poverty reduction; instead, oil
monies are more likely to make matters worse for the poor. CRS
supports the proper democratic management of this natural
resource and the implementation of just development strategies
that provide benefits for the poor.
A first step towards these goals is to build transparency. Oil is
a natural resource owned by all Africans. Nevertheless, as this
report describes, many aspects of the oil industry in Africa are
concealed or shrouded in mystery; key facts about oil are often
treated as state secrets. Thus, it is difficult, if not
impossible, to track how much money is being generated or how
these revenues are spent. Transparency depends on multinational
oil companies publishing what they pay and on governments
revealing what they spend.
The Responsibility for Change:
Like oil exporters in other regions, long-time African oil
producers such as Nigeria, Angola, Congo-Brazzaville, Cameroon
and Gabon, have been largely unable to convert their oil wealth
into broad-based poverty reduction. Nor have these countries been
able to diversify their economies or prepare for a post-oil
future. To the contrary, petroleum has become a magnet for
conflict and, in some cases, civil war. New oil producers, such
as Equatorial Guinea, appear to be repeating some of the mistakes
of their more experienced neighbors.
But while the record of oil exporters in Asia, Africa, Latin
America and the Middle East shows that oil-dependence is most
often a perilous development path, negative outcomes from oil
booms are not inevitable.
The primary responsibility for managing Africa's oil wealth in a
transparent, fair, and accountable way lies with Africa's
governments. Building democratic states capable of focusing on
reducing poverty is one of the key challenges facing Africa in
the 21st century.
Africa's governments, though, are only one part of a web of
interests and relationships in the African oil boom. Other key
actors determining the outcomes of this boom are foreign oil
companies, International Financial Institutions like the World
Bank and the International Monetary Fund, export credit agencies,
and Northern governments. The World Bank Group has played a
catalytic role by supporting changes in legal frameworks and
investment environments, financing projects and providing risk
insurance. Export credit agencies have provided additional
finance in risky environments, with few strings attached. The
U.S. has identified increasing African oil imports as an issue of
"national security" and has used diplomacy to court African
producers regardless of their record on transparency, democracy
or human rights.
The Need for a "Big Push":
Many of these actors are now making tentative steps to address
the "paradox of plenty" problem generated by Africa's oil boom.
They have begun to recognize that improving the distribution of
benefits from oil production is not only an ethical mandate, but
also an essential ingredient towards a more stable and
sustainable world. The IMF and World Bank are taking steps to
increase transparency in Africa's oil economies. Corporate actors
are increasing their philanthropic programs and engaging in
dialogue with civil society on ways to increase transparency in
the sector. And Northern governments, such as the U.S. and U.K.,
are beginning to acknowledge the need to address the perils of
oil-led development. These actions, while welcome, are not
enough.
Because developing oil fields and building pipelines happens
faster than the construction of efficient states and good
governance, only a sustained, coordinated and coherent
international effort - a "big push" to change the policy
environment - by the relevant actors involved in Africa's oil
boom can improve the prospects for transforming Africa's oil
wealth into improvements in the lives of the poor. Only a
concerted change in the incentive structure surrounding oil can
help to ensure that petroleum revenues will be well managed.
The Chad-Cameroon Pipeline Project is the biggest international
effort to date to focus an oil development project on a poverty
reduction outcome. Multinationals, International Financial
Institutions, and governments are working to increase the
benefits and minimize the harm of this oil project to local
populations. International and local civil society groups are
closely monitoring the project. In Chad, Africa's newest
petro-state, the explicit goal is to build government capacity to
manage massive new oil wealth in a transparent and fair manner.
To date, results have been mixed, but the real test will come
when, in 2004, oil revenues will more than double Chad's national
budget overnight.
To improve outcomes for the poor, all actors need to change some
of their practices and work together in a more concerted manner.
Unless the main players in the oil story make specific policy
changes, more fully described in the report's conclusion,
Africa's oil boom is unlikely to foster any significant poverty
reduction. Instead, oil riches most probably will continue to
produce corruption and mismanagement, environmental destruction,
human rights violations, and conflict. It is urgent that
improvements be made now to emphasize transparency and fairness,
the construction of capable and accountable institutions, and the
respect for human rights and the promotion of democratic space in
oil-producing countries.
Summary Recommendations:
National governments should
- Remove legal and extra-legal obstacles to transparent
disclosure and monitoring of the oil sector.
- Guarantee respect for human rights, including freedom of
expression, association, and the press.
- Collaborate with citizen groups monitoring the management and
allocation of oil wealth.
Oil companies should
- Support the international "Publish What You Pay" campaign by
publicly disclosing, in a disaggregated, regular and timely
manner, all net taxes, fees, royalties and other payments made to
African states, at any level, or to local communities, including
compensation payments and community development funding.
- Fully respect human rights in their practices.
The World Bank and International Monetary Fund should
- Use all of their leverage, with both companies and countries,
to strategically promote transparency, fair and accountable
revenue management and allocation, and respect for human rights.
Leverage should be properly sequenced, that is, significant steps
towards the building of good governance should take place prior
to assistance for developing the oil sector. The World Bank
should ensure that all of its activities in the extractive sector
are fully aligned with its poverty reduction mandate.
Export credit agencies should
- Require private sector companies wishing to access loans,
guarantees and risk insurance to publicly disclose, in a
disaggregated, regular and timely manner, all net taxes, fees,
royalties and other payments made to African states.
The U.S. and other Northern governments should
- Emphasize the respect of human rights, the promotion of good
governance and democracy, and the transparent, fair, and
accountable management of oil revenues in their bilateral
relationships with African petro-states.
- Support effective international efforts aimed at increased
transparency of oil revenue payments by companies to developing
countries.
- Use their influence to prioritize transparent, fair and
accountable revenue management within the World Bank and IMF.
The United Nations should
- Ensure that its efforts to promote business partnerships with
oil companies in African countries do not compromise the broader
UN mission of promoting good governance, human rights and
sustainable development.
- Support, through the United Nations Development Program,
African civil society groups focused on increased transparency
and accountability oil-producing countries.
International private humanitarian and development agencies and
nongovernmental organizations should
- Strengthen and support the development of independent
monitoring and information systems regarding oil activities and
revenue management in Africa.
- Provide assistance to local groups to develop their capacity to
generate credible independent information on oil development
projects and oil revenue management.
- Unite with CRS and other groups to support the "Publish What
You Pay" campaign.
Introduction
"Our oil is still, in most cases, the private reserve of the
powers that be . . . Central Africa wallows in misery despite the
growing discoveries of oil . . . Our involvement, as a church in
Central Africa, with the issue of oil does not arise from
meddling in issues reserved for State authorities. We are
witnesses to the suffering of the people to whom we belong. Our
prophetic mission impels us to launch a heartfelt appeal to all
those who participate in oil exploitation in our region or who
wield any political and economic power."
Statement of the Catholic Bishops of Central Africa
(Association of Episcopal Conferences of the Central African
Region), July 2002, issued in Malabo, Equatorial Guinea
Sub-Saharan Africa is in the midst of an oil boom. This boom is a
moment of great opportunity and great peril, especially for
Africa's poor.
The impact of the oil industry in many African countries is hard
to exaggerate. Catholic Relief Services (CRS) conservatively
estimates that sub-Saharan African governments will receive over
$200 billion in oil revenues over the next decade, the largest
and most concentrated influx of revenue in Africa's history. But
in most countries, petrodollars have not helped developing
countries to reduce poverty; indeed, the presence of oil has
exacerbated poverty. In Nigeria, for example, which has received
over $300 billion in oil revenues over last 25 years, per capita
income is less than $1 a day. Surprisingly, Nigeria has
performed worse, in terms of basic social indicators, than
sub-Saharan Africa as a whole and much worse than other regions
of the developing world. This is an example of what has been
called "the paradox of plenty."
The Nigerian experience does not have to be repeated in the
future. The sizable oil revenues generated by Africa's oil boom,
if well managed, offer the potential for improving the lives of
the poor through increased investment in health, education,
water, roads and other vital necessities. But if these revenues
are inserted into governments lacking in transparency and
accountability, it is unlikely that they will fuel poverty
reduction; to the contrary, they are more likely to make matters
worse for the poor. We seek to avoid this worst-case scenario. We
support the creation of conditions that would allow for the just
use of petroleum revenues and the adoption of development
strategies that will benefit the poor. ...
Africa's trade relationship with the rest of the world is
dominated by "extractive industries," especially oil, gas and
mining. These sectors accounted for more than 50 percent of
Africa's exports and 65 percent of all foreign direct investment
during the 1990s. The planned investment in Africa's oil sector
over the next decade will be by far the largest in Africa's legal
economy. This new capital enters at a time when foreign aid to
Africa from industrialized countries is falling and being
replaced by an emphasis from donor nations on trade and
participation in the globalized economy as a means for African
countries to escape poverty. The dominance of extractive
industries in Africa's trade relationships, coupled with this
decline in aid flows, means that it is vital for the region to
make the best use of its oil.
The Importance of Transparency and Accountability
Oil is the common heritage of Africa. Nevertheless, many aspects
of the oil industry are deliberately concealed or shrouded in
mystery; key facts about oil are often treated as state secrets.
When the Catholic bishops of Central Africa met in July 2002 and
issued a statement on oil and poverty in the Gulf of Guinea, they
denounced the "complicity" between oil companies and politicians
in the region and decried oil contracts that "are drawn up in
absolute secrecy. The contracts our states sign are surely to the
advantage of the latter and reinforce our economic dependence."
This secrecy makes it extremely difficult, if not impossible, to
assess whether the division of benefits between companies and
governments is fair and to monitor the extent to which the
government's share is being utilized to benefit the poor. Because
this transparency is essential for holding all major players in
the oil story accountable for their actions, we support the
growing international campaign to "Publish What You Pay".
The Publish What You Pay Campaign
Church and civil society groups alike have increasingly called on
governments and oil companies to be more transparent in their
operations and financial dealings. With information on the amount
of money received by their governments, church leaders, civil
society groups and ordinary citizens can use what political space
exists to try to hold their governments to account. CRS has
joined more than 130 civil society groups around the world in
endorsing the Publish What You Pay campaign platform.
Launched in June 2002, the Publish What You Pay campaign promotes
mandatory, rather than voluntary, disclosure of extractive
industry (oil, gas and mining) revenues from multinational
companies to host governments. The coalition is calling on the G8
industrialized nations to take leadership and promote
transparency over oil, gas and mining revenues worldwide. ...
Relying on companies to disclose information voluntarily has so
far failed because they fear discrimination by host countries and
competitive disadvantage - it is difficult take positive steps
toward transparency unless all of their competitors are obligated
to do the same. The campaign calls for mandatory disclosure
backed by legislation so that citizens in developing countries
are able to call their governments to account over management of
resource revenue. Major human rights and development groups, such
as, Human Rights Watch, Oxfam America, Save the Children, Global
Witness, the Open Society Institute and others have joined local
groups in producing countries in calling for mandatory disclosure
of payments. The UNDP and the World Bank's IFC have endorsed the
concept in principle. ...
Transparency in revenue payments is not a panacea for problems of
revenue mismanagement, but rather a necessary first step for
corporate and government accountability: you cannot manage what
you cannot measure. The campaign is not suggesting that oil
companies tell host governments how to spend their money, but
rather that they should publish information that will help
citizens hold their own government accountable. ... Whether
derived from voluntary action or mandatory regulation, groups on
the ground across Africa are ready to use information on oil
payments to lobby their own governments.
For more information on the campaign, visit
http://www.publishwhatyoupay.org
+++++++++++++++++++++Document Profile+++++++++++++++++++++
Date distributed (ymd): 030618
Region: Continent-Wide
Issue Areas: +political/rights+ +economy/development+
The Africa Action E-Journal is a free information service
provided by Africa Action, including both original
commentary and reposted documents. Africa Action provides this
information and analysis in order to promote U.S. and
international policies toward Africa that advance economic,
political and social justice and the full spectrum of
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