Oil and gas need not be a curse, they can provide a lifeline for previously poor countries

Saturday September 5 2015

When policymakers, donors, technical partners,

When policymakers, donors, technical partners, and private companies work together to develop the necessary policies and support smart planning and rigorous management, entire nations can benefit from expanded opportunity and growth. ILLUSTRATION | JOHN NYAGAH | NATION MEDIA GROUP

By Mark Suzman

This month, President Jakaya Kikwete of Tanzania took a major step toward ensuring his country’s fiscal and economic stability by signing legislation that will help ensure revenue from Tanzania’s natural gas discoveries bring socioeconomic progress for Tanzanian citizens.

These recent gas discoveries have the potential to bring in as much as $1.4 billion per year to Tanzania — more than 10 per cent of current government revenues — within the next decade.

The new revenues could help provide basic needs for citizens such as improved primary healthcare and access to quality education.

The next step for the Tanzanian government will be to develop detailed regulations and procedures to implement the new laws. The new administration will face tough policy decisions on how to manage and allocate resources in a responsible way and in accordance with the laws.

Maintaining a focus on human development goals, transparency and ensuring public awareness and debate with key stakeholders and citizens will be crucial.

A new study by the African Development Bank and the Bill & Melinda Gates Foundation shows that despite recent drops in commodity prices, revenues from recently discovered oil, gas, and mineral reserves in countries such as Ghana, Liberia, Mozambique, Sierra Leone, Tanzania, and Uganda could add between 9 per cent and 31 per cent to those governments’ revenues.

The report, which will be launched in Dar es Salaam soon, also provides updated projections on the timing and magnitude of these natural resource revenues and guidance on how to effectively direct them toward strengthening health, education, and other social services and supporting long-term economic growth.

In Ghana, for example, an estimated one-third of the country’s combined health and education needs over the next decade could be funded from recent oil discoveries.

In Liberia, Mozambique, and Sierra Leone, revenues from recent natural resource discoveries could meet half of health funding needs. The potential opportunities in Tanzania and Uganda are also significant.

In this context, African leaders have a valuable opportunity to work with the private sector and civil society to develop long-term plans that link new natural resource revenues with human development goals.

Such plans should be anchored in realistic expectations about the timing and magnitude of new revenues and avoid borrowing against future earnings — a tactic that could easily backfire due to the volatility of oil and gas prices.

At the same time, African countries need to devote resources to prepare for the global transition from fossil fuels to fight climate change. This process is of particular urgency for Sub-Saharan Africa, a region that combines large reserves of oil and gas with a high risk of suffering from large-scale disruptions in temperature and rainfall.

The release of the AfDB–Gates Foundation report and the signing of the new legislation in Tanzania have come at a pivotal moment.

This month, global leaders from nearly 200 countries will meet at the United Nations in New York to adopt the UN Sustainable Development Goals (SDGs).

A central issue for this 15-year global anti-poverty and development agenda is how African countries will help provide the financing needed to meet the basic needs of their people. New natural resource revenues could be a meaningful source of this funding — if they are effectively and responsibly managed.

History is replete with examples of countries that have squandered their natural resource wealth through mismanagement of revenues, inability to harness private-sector investment, and other grave missteps, including human rights violations and environmental degradation.

But some countries—such as Indonesia (with oil) and Chile and Botswana (with mining)—have successfully applied these revenues to stimulate job creation, economic diversification, and expand social services.

When policymakers, donors, technical partners, and private companies work together to develop the necessary policies and support smart planning and rigorous management, entire nations can benefit from expanded opportunity and growth.

Tanzania has achieved a commendable milestone but there is more to be done. Through good management principles, we hope that the new legislation will turn into a legacy of good natural resource management that can be followed by other African countries in the months and years to come.

Mark Suzman is president of global policy, advocacy, and country programmes at the Bill & Melinda Gates Foundation.