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The ‘oil curse’ in Africa
Inge Amundsen
Chr. Michelsen Institute
Olje for Utvikling i Nord og i Sør
UiTø, Tromsø, 5 December 2007
The Resource Curse
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The Resource Curse
– The Paradox of Plenty
– The Dutch Disease
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What is it?
– Economic explanations
– Political explanations
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Examples
– Angola
– Nigeria
– Cameroon
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Political consequences
The blessed and the cursed
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Norway
Australia
Canada
Chile
Brazil
Peru
Malaysia
Botswana
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• Rich in
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Nigeria
Angola
DR Congo
the Sudan
Sierra Leone
Liberia
Zambia
Colombia
Azerbaijan
…
– Natural
resources
• oil and gas
• diamonds
• other
minerals
• timber
• fish
• foreign aid
• Poor in
– Economic development
• contraction and
concentration
– Redistribution
• increasing
inequalities
• increasing poverty
– Democracy
• authoritarianism
• weak governance
Economic explanations
• The Dutch Disease
– Relative price effect
• Higher currency value
• Imports
• Competition difficult
– Crowding out productive sectors
• Over-investment in extractive industries
• Under-investments in manufacture, agriculture
• De-industrialisation
– Volatility
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Uncertainty for businesses
Low investments in alternative production
Government waste and debt
Capital flight
Political explanations
• The Rentier state model
– Rents increases the stakes/prize of controlling the state
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Off-shore, foreign, High-Tec
Government business, government take
Consumption, enrichment, corruption, embezzlement
Can lead to conflict, violence, civil war
– Rents increases state autonomy
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Natural resources: “un-earned”, easy
Little taxation of domestic economic activity
No “social contract”
Little influence of business interests, middle class
Little influence of civil society, interest organisations
Political explanations
• The Rentier state model
– Rents increases the powers of the state
• Means to manipulate institutions
– Parliament, judiciary
– Special institutions
– Elections
• Means to buy (off) rivals
– Patronage, clientelism, favouritism, nepotism
• Means to buy instruments of coercion
– Military hardware
– Security companies
– Suppression
Example: Nigeria
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40 years of oil production
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Poverty
– People in extreme poverty: 27 to 66%
– Economy as poor as before oil
– Africa’s leading oil producer
– Total income $ 300 bn 25 years
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Corruption
– No 147 of 179 on TI index
– Abacha embezzeled 2-5 bn US$ 93-98
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Authoritarianism
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Biafra War 67-70
Coups d’état 83, 93
“Niger delta syndrome”
Sharia states
Freedom House ranking 4 (PF)
Federal government + some states
Example: Angola
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Oil
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– Comparable to Norway
• Surpassing in 2010
– 90% of exports
• 90% of government revenues
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Diamonds
Poverty
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Gini coefficient: > 0,60
Poverty line: < 60%
No 162 of 177 on HDI
Internally displaced, landmines
Corruption
– No 147 of 179 on TI index
– Dos Santos largest landowner in
California? (“200 families”)
– New airport, “New Luanda”
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Authoritarianism
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Civil war 75-91, 92-94
No elections since 1992
Freedom House ranking 6 (NF)
Non-transparent social spending
Example: Cameroon
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Oil
– 6 in sub-Saharan Africa
– 30 years of oil income
• 3-5 % of GDP
– Peak in 1986
– Chad-Cameroon pipeline
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Poverty
– No 144 of 177 on HDI
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Corruption
– No 138 of 179 on TI index
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Authoritarianism
– Paul Biya since 1982
– Freedom House ranking 6 (NF)
Political consequences
• Democracy first!
– Political science theory: no democratisation of oil-rich regimes
• Democratisation
– Institutions matter
– Good governance
• Service delivery
• Basic human rights
– From below
• Support from the outside
– Transparency (PWYP/EITI)
– Legal standards
– Support to civil society
• Drivers of change
Some literature
Summary
“Without improving their democratic
institutions and administrative capacity,
it is unlikely that African oil exporters
will be able to use petrodollars to fuel
poverty reduction; instead oil monies
are more likely to make matters worse
for the poor”
Catholic Relief Services (2003):
Bottom of the Barrel. Africa’s Oil Boom and the Poor