AfDB Chief Warns Resource Curse May Lead to Civil Wars
By TAMRAT G. GIORGIS
Failure to manage the new discoveries of natural wealth from African mineral resources and the inability to “temper” the excitement of the general public may cause the continent to reach outright civil war, Donald Kaberuka, president of the African Development Bank (AfDB) Group, warned in the last week of May 2012.
Addressing the 47th Annual Assembly of the Group, held in Arusha, Tanzania’s safari town bordering Kenya, Kaberuka sent out a stern warning that Africa could be in for an unpleasant fate of the “resource curse and nationalism,” if its leaders let the proceedings from these bounties be used for consumption and not investment that goes beyond just economic growth but also brings economic transformation.
More and more countries in Africa are discovering oil, recently. It is part of the 122 billion barrels of oil that experts from the AfDB estimate the continent to possess in proven reserves as well as 500 trillion cubic feet of natural gas deposits, estimated to be worth 605 billion dollars.
Angola, Equatorial Guinea, Gabon, Chad, and Sudan have been added to the list of oil exporting countries since the 1990s, while new discoveries have just been made in Ghana, Uganda, and Kenya. While active exploration works are going on in many other African countries, Ethiopia is one of these where it is believed oil is available, particularly in areas bordering South Sudan and Kenya.
Petronas, from Malaysia, has been the more active company in exploring for oil in Ethiopia, digging three wells in Gambella Regional State, although none were found to contain oil.
Another company currently active in exploring oil in Ethiopia is Tullow Oil, an Irish oil company credited for finding oil on the continent’s new frontiers, including Ghana, Uganda, and Kenya. Its vice president for Africa, Tim O’Hanlon, received an award at the Fifth Sub-Saharan Africa Oil & Gas Conference, held in Huston, Texas, last week, for the firm’s latest discoveries in the Eastern Africa region.
Discovering oil in Ethiopia is within reach, according to reliable sources inside the administration of Prime Minister Meles Zenawi.
Tullow managers are convinced that the geological formation of the Turkana Rift Basin is similar in character to the Lake Albert Rift Basin, where they discovered a 1.1 billion-barrel oil reserve this year. Their drilling of one well on the Kenyan side of Lake Turkana led them to discover an oil reserve, which they announced this year.
Tullow signed an agreement with Ethiopia, through Africa Oil, to explore oil in South Omo Block, an addition to five concessions that it has across the border.
Tullow Oil managers have “given a green light” and “very positive” signals to Ethiopian authorities that oil is “within reach” to be discovered next year, according to a high-ranking minister in the administration. Tullow managers have also pledged that the reserve that Ethiopia has in upper Turkana Lake has a lot more “prospect than is found either in Uganda or Kenya,” this minister said.
Nonetheless, transforming this inherited wealth into real wealth requires political will, according to Kaberuka, who also told African governors of central banks and finance ministers that these are “finite resources.”
“Africa’s real hidden treasury is not oil, not gas, not rare minerals, but its youth, its demographic dynamics,” Kaberuka said to those who attended the annual meeting where two heads of state, including the host country Tanzania’s Jakaya Kikwete, were present.
Although seven heads of state were invited by the host country, only Cote d’Ivoire’s Alassane Ouatara came to Arusha, while the rest, including Prime Minister Meles Zenawi, did not show up. Indeed, hardly were Ethiopian senior officials present, although Sufian Ahmed, minister of Finance & Economic Development (MoFED) came only for a day, earlier in the week and before the formal opening of the annual meeting.
If there was anyone to do the Ethiopian government’s bidding, it was Eleni Gabre-Madhin, CEO of the Ethiopia Commodity Exchange (ECX), who defended the record of Ethiopia’s economic transformation at a panel where Mthuli Ncube, chief economist of the AfDB, had warned that the growth is “jobless growth.”
There are an estimated 40 million jobless youth in Africa, of which only 16 million have had jobs over the years, while 22 million have given up hope searching for a job, according to the AfDB.
“Africa can reap that [demographic dynamism] by investing the rent from natural resources through quality education, healthcare, quality infrastructure, skills, and innovation, especially in science and technology,” Keberuka said.
Add agricultural transformation to the list and these are the areas that the Bank wants to focus on, in the next decade, according to its soon-to-be-released 10-year strategy for the years from 2013 to 2022.
But, the tone, if not the rhetoric, in the corridors of the AfDB Group has changed in recent years, from too much emphasis on governments, which are its shareholders, to partnering with private sector actors across the continent.
“After being hamstrung for decades by difficult political and economic conditions and burdensome government policies, it is now poised to become the main engine of growth for the African continent,” Kaberuka said of the private sector last week, signaling that the era of the AfDB Group exclusively working with governments has come to an end.
“The African Development Bank is committed to addressing constraints to private sector development.”
Cecilia Akintomide, secretary general of the AfDB Group, sees that leveraging, particularly the private sector, is where the Bank’s future depends.
Already, the Bank launched, last week, two programmes, including the African Guarantee Fund (AGF), a new scheme designed to provide finance to small and medium sized enterprises (SME) in Africa. It is only 20pc of such companies that have access to finance from banks in Africa, according to a study released last week by the Bank.
“We want to encourage the financial sector [across Africa] to begin to give more loans to SMEs,” Akintomide, said at a press conference during the conclusion of the annual assembly on Friday, announcing the launching, which is supported by the Danish government.
The guarantee fund is only one of the two that the Bank launched last week in Arusha, marking the beginning of an era whereby the Bank will refocus its priorities from financing largely infrastructure, which its senior officials believe helps to market grains, to financing those involved in agribusiness.
Praised as “truly transformative,” the fund came as a result of Kaberuka’s discussion with G8 leaders last month.
“Making sure that resources are available for agriculture, working with partners in the sector, and targeting small and medium enterprises (SME) is crucial,” said Akintomide.
Focusing on SMEs and massive investment in agribusiness will provide millions of jobs across the continent, many of the AfDB senior officials argue, offering what they like to term “inclusive growth.”