EAST Africa’s oil and gas discoveries have brought great hope for the future economic prospects of the region. At the same time, questions remain on what impact the oil economy will have on the areas of interest, most of which are arid and remote, and where local communities poor and marginalised.
The usual risks of the oil economy have been well-documented – environmental degradation, corruption and rent seeking, and Dutch disease, where a sharp inflow of foreign exchange from large oil reserves leads to a currency appreciation, making other sectors of the economy such as agriculture and manufacturing less competitive – and life more expensive.
But less known is other risks that natural resources pose to the well-being of a country’s citizens. Compared to other African countries without large natural resources, living in a resource-rich country in Africa makes you less likely to be literate (by 3.1 percentage points), more likely to die earlier (a shorter life expectancy by 4.5 years), and more likely to be malnourished if you are a woman (by 3.7 percentage points) or a child (2.1 percentage points).
This is according to calculations by the World Health Organisation (WHO) using multiple country Demographic and Health Surveys. The results are significant when controlled for numerous factors that could affect the outcome, such as demographics, education, poverty, household income, country fragility, and even landlockedness. The World Bank actually calls it the “human development penalty” for living in a resource-rich African country.
Even more shocking is that living in a resource-rich country makes you more likely to suffer domestic violence, by a full 9 percentage points.
Why would the oil economy pervade even domestic life to this extent?
The reasons are numerous and interlocking, but they all have to do with the way the huge windfalls of natural resource revenues tend to lead to increasing impunity and lack of accountability or respect for the rule of law.
Often, the signs of impunity are obvious – such as in environmental pollution of the oil economy from lax environmental standards, or low capacity for governments to monitor and enforce standards. The Niger Delta in Nigeria, with its once-frequent oil spills and gas flares, immediately comes to mind.
POVERTY AMIDST OIL
Add to this corruption, rent-seeking, and even state capture, where the very institutions of the state are subverted to serve private interests. This often results in high inequality in the sharing of benefits, where typically a narrow group of people benefit, but the poor remain poor or even get worse off.
In the context of a cash-rich economy where money is flowing like, well, oil – that sense of being left out of the gravy train can be acute.
When inequality and impunity are mediated in the context of ordinary family life, the results can be deadly. Politics is always personal, especially for those caught on the underside of power.
A conference by Oxfam and African Media Initiative on the extractives industry in East Africa that ended in the Kenyan capital Nairobi on August 23, argued that it is important to think about these questions as East African governments draft legislature and policies around the emerging oil economy. Rightly so.
LIFE AND DEATH
Oil and gas aren’t just about the logistics of extraction, taxes and sharing revenue. They have real life implications in the very mundane, quotidian nature of family life.
Think about the policy of “free, prior and informed consent” (FPIC) that is required by extractive companies as they are engaging local communities in areas of interest.
Many speakers at the conference argued that oil exploration and impending production typically comes with high expectations of benefits such as employment and business opportunities for the community. However, it often generates anxieties among local communities with regard to issues such as lack of transparency on contracts signed, or disruption of grazing land, impacts on water and increased interest by land speculators.
Oxfam, in line with global thinking, describes FPIC as “the principle that indigenous peoples and local communities must be adequately informed about projects in a timely manner and given the opportunity to approve (or reject) a project before operations begin. This includes participation in setting the terms and conditions that address the economic, social, and environmental impacts of all phases of extraction and post-extraction operations.”
These conversations are typically centered only on local communities who would feel the immediate impact of extraction. But is there consent around lower literacy, shorter life expectancy, higher malnutrition, and higher domestic violence – the human development penalty that affects resource-rich countries as a whole?
There should be.