OIL REVENUE IN EAST AFRICA

On the third of July, 2012 I was in Africacounts round table forum at Hilton hotel, Nairobi organized by Development initiatives to discuss

          Natural resources in Eastern Africa: what do they mean for poverty eradication?

Activists, politicians, journalists and development enthusiasts were present. In roads were made on the concept of the emerging oil revenue and the implications on the public expenditure. This forum is a bold one and more of this is needed.

From the round table forum it evidently struck me that many don’t really know what the oil sector is all about, and despite learning a lot I still have a lot of other questions in mind. But before I delve into these questions, let’s briefly look at some of the areas of major concern with regard to the oil sector and with regard to oil revenue in Africa.

When the discovery of oil in Kenya was announced by the Ministry of Energy in Kenya, the social media was awash with discussions, expectations were stated in the most exaggerated of ways. Many saw Kenya leap frog to vision 2030 and beyond in just about a few years. My friend saw his dream of owning a car come into existence…

              "the price of oil will be so cheap, I will buy me a big car in just a few years’’

The other one majoring in education was of the opinion that the employment created by the oil industry will save him from the many years of ‘’tarmacking’’ that many Kenyan graduates are forced to undergo with the rising unemployment. How mistaken he is. During the forum a participant mentioned that

   

        ‘’only 28,000 people are employed in the oil sector in South Arabia which has the world’s second largest proven oilreserves’’

Just after a few months the whole oil euphoria died down, no more heated debates, no more insightful discussions on the same in the social media. The journalists too did not have many things to say or report on the oil issue apart from the occasional directives from the drilling companies…

‘’more oil wells to be sunk’’, ‘’ Kenya discovers gas’’, 

Because of the technicalities shrouding the oil sector analytical discussions on the implications of the resource generated by the Oil industry do not feature much on our media houses. The Kenyan journalists are mum on giving very vital details to the citizenry...these trends are not only confined to Kenya but the whole of East African region.

Jeff Koinange was in Lokichar just a few weeks ago in his ‘’ face the nation” programme and I heard the residents complain that they are yet to get any kind of employment from the oil drills, how their environment was being mutilated, how their livelihoods was being disrupted because the oil fields were their grazing lands.

can the oil sector be a solution to unemployment for many?

Only development think tanks realize how important that the clearing of the misconceptions on the oil sector and initiating very lively debates is.

Some pertinent issues that we should be tackling as a nation concerning this sector?

• Managing the high, inaccurate and exaggerated expectations.
• Enhancing Stakeholder participation
• How do we ensure that the non-oil sectors do not succumb to the excesses realized from the oil revenue?
• Taxation and fiscal management.
•  Legal framework
• Land, environment and conflict prevention.
• Oil revenue distribution and sharing.

The oil sector is one shrouded with a lot of technicalities, issues such as

·         how oil prices are set

·         how revenue is generated and shared

·         How contracts are awarded is beyond the understanding of many.

We all realize the primacy of engaging the local communities in drawing partnerships and making all such partnership local community inclusive will prevent future conflicts on these resources. How can this happen if they don’t have understanding of all such factors?  

The government, think tanks and media houses should enhance how it engages the various stakeholders in this sector by:

·         Clearing the fog covering this sector

·         Encouraging more open discussions in the local communities

·         Avoid the spread of ill-conceived ideas to mislead people and raise their expectations so high.

·         Making revenue data and all information concerning the sector open to the public.

Development initiative who organized the forum came up with a four point policy message to East Africa on the discovery of oil and gas recommendation (download the pdfversion of this policy message here)

This is the first of other blog posts that I will be posting on the Oil and Gas discovery in the East African region seeking to tackle questions such as these;- 

• EAC member states have high foreign debt and might easily be forced to take up the settlement of such debts (following the oil revenue) - how best can EAC governments and states position themselves to ward off unfavorable conditions from the major powers with regard to oil?

• The finite oil resource is often addressed by setting up a savings fund-where a share of annual oil revenue is saved for future generations- Uganda already has policy recommendations to put aside some of the Oil wealth for future generations- is this the way to go for EAC member states?
• How can EAC members better protect their non-Oil sector and How to best manage other revenue sources?
• What best model of revenue sharing should EAC states pursue when dealing with the highly uncertain and volatile oil prices?  
• What lessons can EAC states draw from other Oil producing stateS?

I urge each one of us to take up the debate at our own levels and try to get a grip of the implications of the revenue generated from the oil sector, the environmental impact of the sector, do not take a relegated position… this issues will eventually catch up with you if things go wrong in the way the oil sector is handled. When god-forbid the ‘’oil curse” comes into being, you wont be spared.