Oil and gas boom in East Africa promises riches, but experts fear only elites will benefit

by Stella Dawson | https://twitter.com/stelladawson | Thomson Reuters Foundation
Monday, 10 March 2014 11:15 GMT

In a 2006 file photo, children paddle a canoe near an oil well head in Odidi near Okerenkoko in the creeks of the volatile oil rich Niger delta in Nigeria. REUTERS/George Esiri

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Experts fear the cash flow from oil and gas may line the pockets of entrenched political and business interests rather than benefit citizens where millions live on less than one dollar a day.

WASHINGTON (Thomson Reuters Foundation) – The oil and gas bonanza in East Africa is changing the power dynamics of one of the poorest regions in the world, promising to free governments from long dependence on foreign aid once the billions of dollars in natural resource revenues start to flow.

Civil activists from the region, diplomats and corporate officials alike at briefings in Washington over the last few weeks have warned that Kenya, Tanzania, Uganda and Mozambique are running out of time to agree on national policies to develop their newfound wealth in ways that will benefit the lives of their citizens.

The pressure to turn on the oil and gas taps and earn quick cash is so immense that activists and officials said they fear politics will trump good governance, and the money could end up lining the pockets of entrenched political and business interests rather than benefitting citizens where millions live on less than one dollar a day.

“Everyone looks at this as a game-changer for the poor, aid-dependent country, and it is a big opportunity,” Ariano Nuvungo, executive director of the Center for Public Integrity in Mozambique, said at a Brookings Institute forum here.

“But there is a high risk of corruption in countries where there is one dominant political party and a strong political and economic elite, which poses serious challenges about the extent to which there will be pro-poor development.”

Carlos Pascual, special envoy for international energy affairs at the U.S. State Department, said at the same event that East Africa is at a turning point. Oil and gas discoveries are “radically changing the picture, which is a good thing. But 70 percent of people in resource-rich countries live in poverty,” he said.

If countries are to avoid going down the path of Nigeria or Equatorial Guinea and break the cycle known as the “natural resource curse” - where the rich get richer off oil revenues and the poor sink further into poverty - they must push forward now on governance and transparency measures, he said. 

National policies must address who owns the resources, who has the right to develop them, how are contracts awarded and on what terms, and how will the revenues be invested. “This has become a fundamental and central political question,” Pascual said.


The opportunities are immense. More oil and gas has been discovered in East Africa in the last few years than in any other region in the world, according to a study by the consultancy firm Deloitte.

In Tanzania and Mozambique, the offshore natural gas fields are among the largest in the world, enough to make them net exporters. In Uganda, oil revenues are estimated at $2.5 billion a year when oil starts pumping in 2018, easily outstripping its foreign aid and potentially accounting for 50 percent of the government’s budget. In Kenya, oil discoveries are even larger.

But the promise of wealth already has brought political upheaval. In Tanzania, three people were killed last May in Mtwara and more than 100 arrested in riots in the southern coastal area over the construction of a pipeline to ferry offshore gas to the capital Dar es Salaam. Protestors were demanding a greater share of the gas revenues.

In Kenya, security forces have clashed with rival ethnic groups in the politically volatile northwestern Turkana region, where the U.K. oil company Tullow Oil Plc has discovered deposits. More than 10 people have been killed in those clashes and thousands displaced in the arid region of pastoralists awash in guns from unstable neighbors such as Somalia.

“We are grappling with the fact that work is going on on land for which no legislation governs it,” Kenyan activist Ikal Angelei, executive director of Friends of Lake Turkana, said at an Oxfam America briefing for journalists on East Africa’s hydrocarbons.

“If there is an oil spill, that means no grazing can happen. Who would be responsible for that when we do not have a law governing the land? And we have not the information on how much money goes to the national government or to the local government,” she said.

Such problems are common when energy resources are discovered in regions that are sketchily mapped for land ownership and usage patterns, and where communities are poor with minimal infrastructure, said Peter Veit, acting director for governance at World Resources Institute.


Community consultation, fair and transparent contracts and clear policies for how the government will invest the oil and gas revenues were the remedies recommended by civil society activists and enshrined in United Nations and World Bank principles.

But Mohammad Amin Adam, executive director of the African Centre for Energy Policy, said in Ghana this approach is proving insufficient. Parliamentary oversight agencies are underfunded and cannot perform due diligence adequately on revenues, so it is up to civil society organizations to develop highly sophisticated technical and analytical skills to better understand the deals governments are striking and to hold politicians to account.

In Ghana, development of its Jubilee field - which was discovered in 2007 and positioned oil to displace cocoa as the country's second largest export - was delayed over charges of corruption.

“There is no shortcut because the issues we are dealing with are very complex. The networks involved in corrupt deals are fairly sophisticated and the only way to deal with is to be equally sophisticated,” he said.

Simon Thompson, chairman of Tullow Oil - which discovered major oil reserves in Kenya in late 2012 and has operations in Ghana, Uganda and Ethiopia - said his company is committed to engaging with the community on land rights, environmental and security issues because it “wants to get it right”.  But time is not always on his side.

“Kenya really wants to move this very, very fast indeed,” Thompson told the Brookings Institute seminar.

The hunger from governments to turn on the oil cash machine, especially when elections are nearing, is palpable, activists and officials said. Moreover, aid agencies such as the World Bank and Western donors have waning power to influence government policies once coffers start filling with money from the oil and gas fields.

“With the discovery of natural resources, the power is changing. Our governments are gaining new leverage to call the shots and they may not be as open to transparency as the aid donors move out,” said Amin of the African Centre for Energy Policy.

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