Extractive Industries and Corruption The Case of Africa’s Oil Boom Ian Gary, Oxfam America Univ. of Notre Dame, Nov. 13, 2006

Oxfam America and Extractive Industries Mining Oil Gas

Africa’s Oil Boom New producers joining well- established producers Exploration across the continent Increased production from old (Nigeria, Angola) and new producers (E.G., Chad) Sub-Saharan Africa production growing from 3.4 mbpd in 2003 to over 6 mbpd in 2010

Africa’s Oil Boom: Opportunities Huge cash inflow - $349 billion government “take” (PFC Energy) Opportunity to use windfall to increase social sector spending and reduce poverty Strategic interest from outsiders

Africa’s Oil Boom: Challenges History of corruption, mismanagement, conflict and worsening poverty in existing and new producers – paradox of plenty / resource curse Poor governance and human rights environments Secrecy in contracts, opaque revenue payments and government spending Entrenching rentier states / reduction in non-oil revenue collection

Africa’s Oil Boom: Challenges Weak government capacity to manage and allocate windfall Dutch disease – crowding out other productive sectors Enclave economy – few linkages and few jobs produced Increased political instability and conflict Local / regional grievances

Conditions for Success Good governance, human rights and rule of law Address corruption, transparency and accountability concerns –Building appropriate legal framework –Regular independent and published audits of NOCs and IOCs Increased opportunities for watchdog oversight Build government capacity to manage and invest money in people Increase social spending – broad based and equitable

Addressing Corruption Publish What You Pay –Stock Market Listing –Requirements on Financing Investor Interest International Financial Institutions –World Bank EIR – commitments and implementation –IMF – Draft Guide on Resource Revenue Transparency USG legislation

Addressing Corruption Government/Corporate Response = Extractive Industries Transparency Initiative (EITI) Multistakeholder initiative Voluntary – requires host government agreement Validation – “rules of the club” Delisting – “free rider” problem Incomplete picture – licensing, contracts Non-Western participation? Incoherent policies of Western governments

Extractive Industries and Corruption The Case of Africa’s Oil Boom