East Africa is the global oil and gas industry’s hottest frontier. Barely a month goes by, it seems, without a major discovery in Mozambique, Tanzania, Uganda, or the eastern Democratic Republic of the Congo.
This new African windfall is hardly without precedent. Several west and central African states -- most notably Angola and Nigeria -- have already experienced petroleum booms of their own. Over the last decade, they benefited from a spectacular jump in oil prices, which rose from $22 per barrel in 2003 to $147 per barrel in 2008 and remained high, for the most part, until recently. The spoils were enormous: from 2002 to 2012, Angola’s GDP jumped from $11 billion to $114 billion and Nigeria’s went from $59 billion to $243 billion.
The opportunity afforded by this extraordinary decade was unprecedented and is unlikely to recur. Sadly, however, decision-makers have mostly squandered it. If the new east African producers are not to repeat the mistakes of the established ones, then, they should heed the lessons of Africa’s last oil boom.
GREASING THE WHEEL
The last decade did see some improvements for Africa’s oil producers, especially when compared to the continent’s earlier boom in the 1970s and early 1980s. Under the stewardship of a handful of reform-minded technocrats, countries such as Angola, Gabon, and Nigeria tamed inflation, stabilized their economies, and wiped debt burdens clean. They subjected chaotic banking sectors to new regulatory discipline. And in response to criticism from the likes of Oxfam, Global Witness, and the Open Society Foundations, they instituted some limited governance reforms that increased, albeit marginally, the transparency around opaque oil dealings.
Yet these improvements, though praiseworthy, failed to transform Africa’s oil producers. The emphasis by many observers on the need for capacity building was misplaced. The key challenge was not that elites in these countries lacked the skills or structures to properly manage the boom; it was their unrestricted access to billions of petrodollars. Most were already sophisticated, worldly decision-makers with the ability to rationally pursue
Loading, please wait...