It’s oil. Africa’s oil revenue will far exceed the sums it now earns from farm exports (about $12 billion a year). With Western multinationals pouring money into African oil projects, their partners in African government expect about $200 billion per year in oil revenue over the next 10 years. If that money went into health, education, roads and new industries, it could go a long way toward turning the continent around.
So far, however, Africa’s oil boom has not fed the greater good. Average GDP growth fell from 4.3 percent in 2001 to 3.2 percent in 2002, and a recent study by Catholic Relief Services concludes that African petrodollars have actually worsened poverty. Oil money tends to discourage investment in other industries, hurt exports by inflating the local currency and create a trove of easy money that leaders use to buy off opponents and pacify the populace with civil-service jobs and low taxes. When oil prices crash, oil economies fall too, often helping trigger rebellions, says Oxford economist Paul Collier, who has documented a correlation between natural-resource dependence and civil wars.
Nigeria is the most oil-dependent economy in the world, and suffers constant conflict in its oil-rich Niger Delta. It has earned $340 billion from oil over the past 40 years, but the percentage of Nigerians living on less than a dollar a day has risen to 70 percent from 36 percent in 1970. Had those oil profits been invested at just 5 percent interest, says UCLA Prof. Michael Ross, Nigeria would have made $454 billion, or $3,750 per capita, equivalent to 15 years of Nigerian wages. In Angola, which takes in $3 billion to $5 billion a year in oil revenue, nearly half of all government expenses don’t appear in the official budget, and roughly $1 billion a year in revenue went unaccounted for from 1997 to 2001.
The CIA and other Africa watchers say the money is lining the pockets of corrupt leaders. Multinationals often pay a secret “signing bonus” to African governments, followed by royalties on oil sales. These deals are often financed by the World Bank or export credit agencies in Europe and the United States, which could use their clout to staunch corruption. Last year antipoverty groups launched a campaign that asks oil companies to “publish what you pay” oil-producing governments and wants to make such disclosures mandatory for companies seeking to sell stock to the public.
So far no major player is going along. In June, British Prime Minister Tony Blair brought oil companies, governments and advocacy groups together but they’ve yet to cut a deal. A similar effort by the World Bank has yet to yield results. Oil companies say mandatory disclosures would hurt their relations with African governments. But that seems a small price to pay for a deal that could put billions of oil dollars to work. After Cancun, there may be no bigger or better idea left for improving the lives of millions of Africans.
