This is how to avoid the curse afflicting African oil producers

Kenya’s problems have everything to do with distribution of national resources. Real or perceived exclusivity breeds hatred and hopelessness that fuels our daily struggles against our “enemies”.

People turn against one another in self-destructive frenzy, oblivious of the fact that the true enemy is not their poor neighbour but the superstructure designed by the elite.

The elite have always designed an elaborate system of misinformation and propaganda that blurs citizens’ ability to intelligently visualise reality.

From Mpeketoni to the Rift Valley through Mt Elgon, land has for a long time been at the centre of our conflicts.

But even a more potent resource that can lead to tension is the recently discovered oil in some parts of the country. This is where the saying Ukiona mwenzako ananyolewa tia kichwa chako maji becomes relevant.

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Loosely translated, it cautions us to be aware of the fact that the bad things happening to our neighbours can befall us too if we do not take care. Today, it is Nigeria. We can be in the same trouble tomorrow.

In their phenomenal book Curse Of Black Gold, Ed Kashi and Michael Watts accuse the Nigerian government of bearing the greatest responsibility in ruining the country by failing to manage this resource.

In many parts of Africa, the discovery of oil ceased being a blessing. It is reasonable to say that it is oil that has created many of Nigeria’s problems, including the Boko Haram insurgency. Writing for Business Day, Simon Lincoln argues that whoever coined the phrase “resources curse” was probably staring at Nigeria.

Because of Kenya’s internal contradictions, it has to pay attention to the management and exploitation of this resource otherwise the country may be reduced to smouldering ashes in years to come.

NORWAY THE BEST MODEL

A dialogue on how this resource is exploited will be healthy for the nation. The dialogue should happen long before the first barrel of oil is extracted.

It should deliberate on, among other things, evolution of an inclusive policy involving local communities and how to deal with marginalisation. More importantly, the dialogue should address the model of oil exploitation to be employed.

Helge Ryggvik in The Norwegian Oil Experience: A Toolbox For Managing Resources, says Norway has the best model for exploitation of this resource.

After discovering oil, the country built an efficient national oil industry while remaining an egalitarian welfare state.

Generally, there are three models for exploiting a resource: the community ownership; the private sector ownership; and the public sector ownership. The choice Kenya makes will determine its path to heaven or hell. And yes, choices can have consequences.

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In the first model, communities, clans or families exploit and market the resource. This is the model that has largely been employed in the Middle East. Its advantage is that it addresses issues of exclusion by allowing revenues generated to flow into the society directly.

In the short term, this dissipates discontent and bolsters communal cooperation with the state. This model, however, has more cons than pros. It almost certainly leads to what is called the “Dutch disease” which kills the agricultural and manufacturing sectors.

The Dutch disease is characterised by strengthening of the local currency and makes imports cheaper and exports expensive. If we adopt this model, our tea, coffee, tourism and flowers would be unattractive to foreigners. This will kill agriculture and lead to loss of jobs yet this is the sector that employs 75 per cent of Kenyans.

DEEPENING EXCLUSION

With money flowing into communities and the shilling appreciating, imports would become affordable and attractive. The appetite for and capacity to buy high quality imported products will lead to the death of the domestic industry. Hopelessness and insecurity will follow.

The petroleum industry creates very few but highly specialised jobs. This model would eventually lead to massive unemployment and the consequences to peace and political stability associated with it. This may have contributed to the recent Arab Spring.

The private sector model which Kenya seems to be gravitating towards, assigns rights to exploit and market the resource to a private firm. The company pays the government royalties and taxes. This money is then expected to benefit the public through implementation of projects by the government.

The upside of this model is that it rarely causes the Dutch disease and doesn’t interfere with the functioning of other sectors in the economy. In the absence of graft, it may be efficient in resource utilisation.

Unfortunately, the model does not address exclusion. In the Kenya case where the resource is in a heavily marginalised area, the model is likely to deepen the feeling of exclusion and generate grievances that may threaten peace.

Already, there are sentiments in Turkana that security personnel are more concerned with guarding Tullow Oil facilities than protecting people from regular attacks by rustlers. This model can flaunt opulence before the eyes of the excluded.

REVENUES FLOW TO GOVERNMENT

It may not guarantee optimal returns to the country if the company is foreign and loopholes for corruption exist. Just like Turkana locals, other Kenyans may not feel the impact of oil revenue if we adopt this model. It is the model employed by Nigeria. The results are there for all to see.

The third is the public sector ownership model. This is employed by Malaysia through a publicly owned company called Petronas.

In this case, a firm is set up to exploit and market the resource. All revenues flow to the government which deploys the funds to implementation of priority projects.

It also directs funds to implement projects of specific interest to locals. In our case, a parastatal can be set up and the funds accrue to the Treasury. A law can then be put in place that allocates a percentage of the money to the host county government.

This model can address inclusion and prevent the Dutch disease. The fear among Kenyans for this model is as a result of the view that corruption may be its undoing. It is reasonable to say that this model is the least evil of the three.

Nevertheless, we should open the dialogue for comprehensive consultation with Kenyans, experts and other players to ensure we get started on the front foot. Masinde Muliro University would be willing to host it.

Prof Egara Kabaji is the deputy Vice-Chancellor Masinde Muliro University of Science and Technology while Emmanuel Manyasa teaches Economics at Kenyatta University.