How weak structures could edge the poor out of Africa’s resource

Thursday April 12 2018

Oil exploration in the Albertine Basin of Uganda.

Oil exploration in the Albertine Basin of Uganda. East Africa countries have been ranked poorly in terms of putting in place governance structures that ensure citizens and not the corrupt elite are the key beneficiaries of natural resources. PHOTO | FILE | NATION 

By NJIRAINI MUCHIRA
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East African countries have weak and poor governance structures for the oil, gas and mineral sectors, something that mean they are more likely to fall victim to the so-called “resource curse”.

Despite significant reforms to strengthen the regulatory regime for the two sectors, a report by the New York-based Natural Resources Governance Institute (NRGI) contends that the governance structures in the region are not tight enough to ensure society is the ultimate beneficiary.

Across East Africa, a region endowed with vast crude oil, liquefied natural gas and mineral deposits, governments are struggling to balance various interests in the management of the resources to avoid travelling the route of other resource-cursed nations.

According to NRGI’s 2017 Resource Governance Index, although resource wealth and how it is managed could make a crucial difference in the lives of 1.8 billion poor people in 89 countries assessed by the index, almost half the people live in countries with weak, poor or failing resource governance.

“For many of these countries, the dividends of well-governed resource extraction offer a path from poverty. But without stronger institutions and policies, as well as a reduction in corruption, countries are more likely to fall victim to the “resource curse” under which the poor stay poor and elites accumulate further wealth,” the index says.

Value realisation

It adds that changing this dire situation requires improving governance in terms of the institutions, rules and practices that determine how company executives and government officials make decisions and engage and affect citizens, communities and the environments they inhabit.

The index assesses policies and practices that authorities employ to govern the oil, gas and mining industries under the broader pillars of value realisation, revenue management and an enabling environment.

The index ranks countries in East Africa poorly in terms of putting in place governance structures that ensure citizens and not the corrupt elite are the key beneficiaries of natural resources.

Tanzania which is endowed with vast minerals and natural gas has a weak governance structure that is both a mix of strong and problematic areas of regulations, ultimately meaning that although its resources can help society, it is likely that the eventual benefits are weak.

The country ranks at position 36 out of 89 countries for oil and gas and position 42 for mining.

Poor governance structures

Uganda ranked 51, Ethiopia, 57, Democratic Republic of Congo at 75, and South Sudan at 76, they are said to have poor governance structures, meaning that although they have established some minimal procedures and practices to govern resources, most elements necessary to ensure society benefits are missing.

Kenya, whose oil and gas sector is still in the nascent stages, has not been included in the ranking.

According to the index, Norway, Chile, the United Kingdom, Canada and the United States were ranked on top because they have established laws and practices that ensure extractive resource wealth benefits citizens.

Eritrea, Turkmenistan, Libya, Sudan and Equatorial Guinea are ranked at the bottom due to the fact that they have almost no governance framework to ensure resource extraction benefits society as benefits flow only to a select few companies and elites.