Is Oil & Gas Discovery Changing East African Politics?

By D.A. Barber AFKI Original Published: August 29, 2014, 6:36 am

Experts at a Brookings Institute forum in February warned the new energy producing countries were running out of time to face the critical policy decisions required to best manage their resources and avoid the pressure to simply earn quick cash for the entrenched political and business interests.

Western aid agencies and foundation donors also fear they will gradually lose influence over government policies once the oil and gas money starts pouring in.

“When these countries have the opportunity of these big new resources, I think our assistance needs to shift to ‘how do we help them maximize and use them to drive real national development,’” Center for Strategic and International Studies’ Cooke told AFKInsider. “I think that’s where U.S. assistance in these countries needs to go.”

The U.S. government has targeted the East Africa region specifically through its Trade Africa and Power Africa initiatives. And the U.S. State Department’s Energy Governance and Capacity Initiative (EGCI) has made Uganda and Mozambique a priority to “establish the capacity to manage their oil and gas sector resources responsibly” with technical and capacity building assistance, according to the State Department’s website.

The State Department program is also meant to complement other international efforts, such as the Extractive Industries Transparency Initiative (EITI).

“The Energy Governance and Capacity Initiative, I think, is a good model,” Cooke told AFKInsider. “That kind of technical assistance to governments, that’s going to be increasingly important.”

“There is a component there that deals with strengthening the capacity of institutions to deal with issues of managing natural resources,” Brookings Institute’s Kimenyi told AFKInsider. “And that has a lot to do with the signing of contracts, and negotiations, and so on.”

In fact, even countries with good intentions for managing their resources have been out-negotiated and exploited by foreign companies.

But even with the State Department’s backing, the U.S. is a relatively small player, according to World Resources Institute’s Veit who notes that the Norwegian Agency for Development Cooperation (NORAD) has been the real force involved due to their history of oil development.

“They’ve been trying to help [countries] do everything from the build-up of public oil institutions to helping them think through new legislation and revenue management of oil,” Veit told AFKInsider.

Other U.S initiatives with the potential to stem resource corruption have stalled.

Oxfam America is taking the U.S. Securities and Exchange Commission to task for foot-dragging on the 2010 Dodd-Frank regulations that would force U.S. oil, gas, and mining companies to disclose the common practice of direct payments to foreign governments for natural resource access.

In a July 14 letter to the Commission, Oxfam – an international confederation of 17 organizations combating poverty in more than 90 countries – threatens to sue unless the Commission agrees to finalize the delayed “pay-to-play” regulations by the end of this year.

Though passed in 2010, a federal judge sided with oil industry groups and tossed out a draft version of the disclosure rule last summer. The Securities and Exchange Commission now estimates it will be March 2015 before the revised draft proposal will be ready, which critic call a questionable and illegal delay.

Meanwhile, the East African oil and gas boom isn’t waiting.

“I think the good thing is that we are seeing African countries actively having this discourse about how they invest some of these monies for the long-term development and human security in their countries,” Woodrow Wilson International Center’s Muyangwa told AFKInsider.

The consensus seems to be that no mater how it is accomplished, transparency and good governance in oil contracts and revenue use will require stronger collaboration between these newly resource-rich governments and the civil society organizations, private sector and local communities they serve.

“I think all of these countries are very vulnerable,” Cooke told AFKInsider. “The question is can you build a constituency within those countries that are powerful enough and knowledgeable enough to hold their governments to account.”

Mwangi Kimenyi, senior fellow and director of the Brookings Institute Africa Growth Initiative, says “it’s a different time” and Africa’s civil society has grown more assertive about holding their governments accountable for the resource deals they cut.

“I don’t think that we are going to see the same problems as in Nigeria, in Angola and Equatorial Guinea,” Kimenyitold AFKInsider. “I don’t think many leaders will be able to get away with it as they used to do before. So I would say that before we see a real exploitation of these resources, there will be safeguards to make sure there is transparency.”

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