Africa’s oil boom: Comparative lessons for Ghana Dr Kathryn Sturman, South African Institute of International Affairs DANIDA Development Days 2-3 May 2011

Changing international relations with Africa s ‘Wave of democracy’ Africa marginalised in global economy, low FDI, little growth 2001 US strategic interests to lessen dependence on Middle East’s oil Rise of China & India new demand = oil price rise US 15% of oil from Africa China 33% of oil from Africa New exploration & offshore deep drilling technology Gulf of Guinea & Rift Valley 2011 North African uprisings

Oil boom was NEPAD wrong? Africa annual GDP growth rates: 1999: 2.7% 2006: 6.2% Africa annual real GDP growth rate : 5.3% Strongest performers : Equatorial Guinea: 20.3% Angola: 12.4% Nigeria: 8.4% Sudan: 7.6% (source: World Bank) “Development is impossible in the absence of true democracy, respect for human rights, peace and good governance.” – NEPAD Abuja, October 2001 Neo-liberal bargain: better governance by African leaders (APRM) to attract foreign investment = partnership for development BUT international pressure for democracy undermined by the scramble for oil security

Lesson 1: democracy needed for long-term, widespread benefits ‘Resource curse’: oil wealth undermines democracy – Michael Ross, 2001: Rentier effect Repression effect Modernisation effect Ghana does not need democracy to experience high economic growth from oil production, BUT, only vigorous public participation & oversight can ensure that the benefits are shared widely and in the long-term. E.g. Angola = record-breaking growth, but high inequality; attracts investment from US and China, but remains a ‘petro- military state’. Militarisation & patronage keeps leaders in power, but ultimately unstable, e.g. Libya, Sudan

Lesson 2: regulatory regime cannot be externally imposed Chad’s oil pipeline supported by WB subject to well designed regulatory regime Loi 001 adopted in 2000, by 2001 signature bonus spent on weapons Dec 2005, Chad’s Pres Deby abrogated the law, plundered Future Generations Fund Context of regional instability, conflict with Sudan – Ghana vulnerable to conflict spillover from neighbouring states

Lesson 3: EITI helps, but momentum needs to be built and maintained Of Africa’s oil producers, only Ghana and Nigeria are EITI compliant EITI candidate countries: Cameroon, Chad, DRC, Congo Rep, Gabon The missing links: Angola: ‘observer’ status, but reacted badly to BP plan to publish payments in 2001 Uganda: EITI compliance provided for in Oil & Gas policy, but govt not yet signed up Sudan: Southern independence an opportunity for EITI advocacy Nigeria Pres Obasanjo joined EITI in 2003 Audit reports of oil sector boosted transparency & shed light on the industry for the first time BUT has not led to significantly better governance of the oil sector Momentum lost under Pres Yar’Adua Pres Goodluck Jonathan has promised to reform oil industry, BUT Petroleum Industry Bill, 2008 blocked by vested interests in NNPC & IOCs - Contract insecurity; separate licensing for oil & gas production may be counter-productive

Lesson 4: Pay attention to local social & environmental costs Lake Albert in Albertine Graben discovery by Tullow Oil 2006 Strong civil society campaign for transparency of oil revenues in Uganda, with local PWYP committees BUT militarisation of oil areas & political patronage DRC: dispute block 1 granted by Kabila to both Tullow Oil and consortium backed by PetroSA Conflict & contract uncertainty makes DRC oil investment difficult

Conclusion Ghana is unique in Africa in terms of democratic consolidation: two peaceful changes of party in power, 2000 & 2008 Test case for the ‘resource curse’: if oil production begins after democracy established, can it endure? Strong institutions more important than good policy Rough neighbourhood & cut- throat oil industry are reasons for caution