“WE NEED LEADERS THAT UNDERSTAND that they are running their country for the benefit of every single individual. Every child in this country is his responsibility; we need people who really believe in that, who cannot go to sleep because some people cannot eat or cannot find medicine.”
I couldn’t agree more with this beautiful sentiment from Mo Ibrahim, founder of The Mo Ibrahim Foundation, an African foundation established in 2006 to support good governance and leadership across the continent.
And I believe that African leaders are heeding this call.
Bill Gates, arguably one of the most successful businessmen in the world, agrees.
“Although 2016 was a tough year for many African economies, almost every trend on the continent has been moving in the right direction over the last decade. Per capita income, foreign investment, agricultural productivity, mobile banking, entrepreneurship, immunization rates, and school enrollment are all heading upwards. Poverty, armed conflicts, HIV, malaria, and child mortality are all on the decline—steeply so in many places.”
Over the past decade, the continent has made astounding gains. The World Bank’s “Doing Business in 2005”1 report ranked Africa in last place in terms of its pace of reform. Yes, about what you’d expect, given the political and socioeconomic climate at the time. Then we began to witness a stirring: The 2007 index positioned the continent in third place among the world’s fastest reformers, citing at least one reform in two-thirds of African nations. Today, the momentum of positive reform efforts is noteworthy across the continent. The 2016 report ranked five African countries in the top ten for improving nations and credited sub-Saharan Africa alone for almost a third of all regulatory reforms that simplify doing business.
Ernst & Young’s annual (and aptly named) “Africa Attractiveness Survey”2 of international respondents in 2011 confirmed the positive outlook:
68 percent saw Africa as a more attractive investment destination than in 2008.
75 percent were optimistic about Africa’s prospects for the subsequent 3 years.
43 percent were planning African expansion.
As of the 2015 attractiveness survey, Ernst & Young fully expects to see compound annual growth rates in excess of 5 percent through 2030 in 24 sub-Saharan African countries. Successful reform initiatives, supported by both local governments and the private sector, are helping transform the continent’s prospects.
Thanks to groups like the Investment Climate Facility for Africa (ICF), reform is coming. The ICF and other independent organizations foster initiatives that make it possible for businesses “to register, pay their taxes, solve commercial disputes, clear goods through customs, and so much more, in a quick, simple and transparent manner. This simplification and efficiency is helping to speed up economic growth, ultimately changing the lives of millions of Africans.”
And what about the most recent release of “Doing Business”? Outlooks continue to shine brightly in the south, in particular: As of May 2018, a third of all the regulatory reforms that the report documents were in sub-Saharan Africa.
“Sub-Saharan Africa has been the region with the highest number of reforms each year since 2012. This year, ‘Doing Business’ captured a record 107 reforms across 40 economies in sub-Saharan Africa, and the region’s private sector is feeling the impact of these improvements. The average time and cost to register a business, for example, has declined from 59 days and 192 percent of income per capita in 2006 to 23 days and 40 percent of income per capita today.”3
The African continent has seen some serious economic gains over the past two decades. After a period of stagnation, we saw high average growth rates from smaller economies like Ghana, larger economies like Nigeria, and even “fragile states” like Angola.
But Christopher Adam, Oxford Professor of Development Economics, cautions that these past gains might now be in jeopardy.
“Ultimately it is fiscal policy that will play the decisive role in ensuring that Africa’s macroeconomic adjustment is successful. It needs to be designed in a way that does not undercut the growth-promoting effects of recent infrastructure investments. It may then preserve the gains in poverty reduction and improved service delivery that materialized in health and education,” Adam wrote in an article for The Conversation.4
To maintain the forward progress, Adam calls for macroeconomic balance and cautions against excessive taxation or curtailing foreign exchange—strategies he says only embolden the black market and worsen widespread shortages. “Decisive action is needed to navigate the difficult economic waters that lie ahead without undoing the gains of the past two decades,” he wrote. “Success will require difficult political choices, especially on taxation and government expenditure.”
The International Monetary Fund names the following “Five Keys to Smart Fiscal Policy:”5
Countercyclical (smooths the business cycle).
Growth-friendly (supports long-term economic growth factors of capital, labor, and productivity).
Promoting inclusion (ensures that growth is shared among the people, who fully participate in the economy).
Supported by a strong tax capacity (has a stable source of revenue through taxation).
Prudent (is cautious and sensible).
And around the continent, we are seeing evidence that leaders are implementing these keys.
Plummeting oil prices on the global market have significantly stifled economic growth in the petrostates, whose economies rely on their energy revenues. Despite this, Nigeria is weathering the economic storm rather well, receiving positive ratings for its top 5 banks—despite the clutches of a recession—for the first time in some 20 years.
Why?
In response to the global financial crisis that hit in 2008, Nigeria introduced capitalization requirements and reforms to bank oversight to enhance transparency and consolidate government finances. And in 2017, an accounting regulation change eliminated the one-year waiting period for banks to fully write off non-performing loans, enabling them to clear up their balance sheets immediately using capital reserves and keeping all five national banks technically solvent.
This is excellent news for Nigeria. But it’s also a beacon of hope for the rest of the continent: Yes, Nigeria is blessed with a wealth of oil reserves—but we’ve seen that, in the past, this nation has let this bounty cloud better judgment. In short, Nigeria was the poster child of the resource curse. If Nigeria can start turning it around, other countries can, too.
And I’m not just talking about oil and gas. A sound fiscal policy helps form the backbone of a solid economic management strategy that will promote growth and prosperity for all. Of course, a country can’t decide which natural resources will be discovered within its borders—but the lawmakers of that country do decide which policies to adopt regarding those resources.
And their decisions impact their economy.
As the National Resource Governance Institute reminds us, “When managed prudently, oil, gas, and mining investments and the vast revenues they generate can sustain development efforts and make a lasting positive impact on the life of citizens. However, without proper policies, frameworks, and oversight, these same investments have the potential to destabilize public financial management systems, bring negative environmental and social impacts, and increase the risk of corruption.”6
Just as Nigeria is hopeful that its new accounting regulations will continue to push them forward in positive strides, Tanzania also introduced new laws for its extractive industries. This eastern African republic is rich in minerals, including gold and other precious metals, and an important element of the new legislation was increasing the taxation in the mining industry. The result: a lofty 74 percent tax rate that gave Tanzania the highest mining taxes anywhere on the planet.7
And while this exorbitant rate might have been a good way to pad the government coffers, all it really accomplished was to anger the citizenry and create an unwelcoming business environment. After a year in place, however, Tanzanian President John Magufuli announced the government’s plan to reassess the fiscal regime. The concern is that the new tax strategy hasn’t struck the right balance between being too low for the government to really capitalize on the resources versus being too high to promote investment. A secondary concern is that higher taxation might actually be causing increased tax evasion—further cutting into the government’s revenue stream.
It seems President Magufuli might have read Professor Adam’s work! While the legislation might not have been a success, this decision, at the very least, shows the Tanzanian government’s understanding of this complex situation and its willingness to continue improving the regulations.
Tanzania might look to the south to see how it can be done.
One example of a government that has developed an effective economic policy is Botswana. The majority of this landlocked nation is covered by the Kalahari Desert, leaving little opportunity for agricultural ventures. Prior to 1970, it was considered one of the poorest countries in the world. . . but that changed with the discovery of diamonds, which brought about dramatic growth in GDP, per capita income, and a balance of payment surplus. But the diamond bonanza did more than lift the nation out of extreme poverty: The government was also forward-thinking enough to institute a policy of continually reinvesting revenue from its diamond industry for the socioeconomic benefit of its people, funding such social services as its transit system, education, and healthcare.
Or Tanzania could consider the successes to the west.
Ghana’s innovative Petroleum Revenue Management Act (more on that later) outlines mechanisms for collecting and distributing oil revenue, with clear specifications on percentages used to fund the annual budget, set aside for future generations, and invested back into the industry and the infrastructure. The well-crafted legislation created a fiscal regime that ensures that all oil revenue is openly accounted for, deposited into its appropriate “basket,” and then used for its intended purpose.8 Ghana’s legislation offers a well-designed fiscal system that accounts for the nature of the oil industry and the intrinsic uncertainties of its E&P, as well as the government’s capacities to promote the industry while generating revenues to support socioeconomic development of the nation.
Of course, we can talk about positive business climates and the importance of well-designed government policies for managing oil and gas revenue until we’re blue in the face—but it won’t mean a thing if bribes continue to be business-as-usual.
We’ve talked about the hazards of foreign “aid.” But in addition to the potential for countries becoming reliant, here’s yet another slant: Financial “help” prevents good governance by promoting distance between a government and its people. Rather than focusing on enhancing citizens’ needs like housing, education, healthcare, or access to energy, governments may instead look for opportunities to please the donors.
Writing for The Spectator, Harriet Sergeant puts it more bluntly: “When foreign donors cover 40 percent of the operating budgets of countries such as Kenya and Uganda, why would leaders listen to their citizens? Schmoozing foreign donors comes first.”9
While my outlook might not be as pessimistic, I do agree that the “schmoozing” often amounts to bribery. And bribery, whatever the form, is taking place at all levels. Companies pay bribes to get their proposals approved. Government courts accept bribes to affect the outcome of trials. And even at the individual level, people hand over bribes to get access to better public services—services that should be freely available to all.
This is not a smart business model. I’ve seen it time and time again: Once the payments start, they never stop. Businesses that push themselves into the market through bribes pay to get in, then keep paying to stay in, and then face hefty fines that they pay to get out.
When it comes to bribery, my advice is simple: Just don’t pay.
And, yes, it really can be that simple—but we all have to refuse. It’s up to every one of us to stand up and speak out. We must be a combined and cohesive voice for ethics, morality, and fairness to push Africa out of this rut of corruption once and for all. When we walk into communities where we see corruption or witness a government not treating people with respect, we must firmly state that we cannot play a role there.
Oil and gas companies should lead this charge. It only makes sense: Their influence is mighty, and they are the trailblazers in many aspects already.
Industry is already doing that, thanks to initiatives like the U.K. Bribery Act, the U.S. Foreign Corrupt Practices Act (FCPA), and the Canadian Corruption of Foreign Public Officials Act (CFPOA). These acts outline how countries respond to offenses such as offering, giving, or accepting a bribe, and they carry stiff penalties for violation. Penalties for failing to comply can include being barred from tendering for government contracts, significant fines, and even criminal convictions. In addition, many anti-corruption organizations have sprung up to back up governments in their campaign toward universal fair practice.
“Enforcement of U.S. extraterritorial bribery legislation has dramatically escalated in the past decade and shows little sign of abating,” Reagan Demas, a partner at Baker & McKenzie LLP in Washington, D.C., told Financier Worldwide in 2012. “Other countries have passed similar legislation and are beginning to enforce those new laws. In the wake of criminal settlements with companies operating in Africa in the oil and gas, mining, telecommunications, freight forwarding and other industries, businesses are recognizing the importance of a well-developed compliance program when operating in these higher-risk/higher-reward jurisdictions.”10
The Extractive Industries Transparency Initiative (EITI; www.eiti.org) sets a global standard for transparency in oil, gas, and mining. EITI promotes a more transparent business environment by shedding light on what companies do with the oil, gas, and minerals they produce, where their revenue goes, and what jobs were created. At the same time, EITI requires governments to report the revenues they receive from the extractive industries. EITI compliance creates a level playing field for companies, and the resulting transparency contributes to improved political stability and reputation for the countries. And that, in turn, improves the compliant country’s investment climate.
Meanwhile, Publish What You Pay (www.publishwhatyoupay.org) is a global civil society coalition that helps citizens of resource-rich developing countries hold their governments accountable for the management of revenues from the oil, gas, and mining industries.
Other more broad-based groups expand their reach beyond the energy sector. The UN Global Compact (www.unglobalcompact.org) asks companies to embrace, within their sphere of influence, a set of core values in the areas of human rights, labor standards, the environment, and anti-corruption. Likewise, the Global Corporate Governance Forum supports regional and local initiatives to improve corporate governance in middle- and low-income countries, and Transparency International is a global civil society organization battling corruption.
And on the continent itself, Africa has its share of groups fighting for just practices:
The Africa Governance, Monitoring and Advocacy Project (AfriMAP) aims to monitor and promote compliance by African states with the requirements of good governance, democracy, human rights, and the rule of law.
The African Parliamentarians Network Against Corruption (APNAC; www.apnacafrica.org) is working to strengthen parliamentary capacity to fight corruption and promote good governance.
The African Peer Review Mechanism (APRM; aprm-au.org) is a system introduced by the African Union to help countries improve their governance.
The Business Coalition Against Corruption (BCAC) of Cameroon, originally established to equip member companies to address corruption, expanded to represent British, Canadian, French, Italian, and U.S. companies operating there.
Business Ethics Network of Africa (BEN-Africa; www.benafrica.org) facilitates interaction between academics and practitioners who share an interest in business ethics.
Eastern, Central and Southern Africa Federation of Accountants (ECSAFA; www.ecsafa.org) strives to build and promote the accountancy profession in the eastern, central and southern regions of Africa.
Information Portal on Corruption and Governance in Africa (IPOC; www.ipocafrica.org) is an online resource portal that can act as a primary reference point for those interested in combating corruption and promoting democratic governance in Africa.
Open Society Initiative for Southern Africa (www.osisa.org) collaborates on human rights, education, democracy building, economic development, the media, and access to technology and information.
Southern Africa Forum Against Corruption (SAFAC) aims to build the capacity of anti-corruption agencies in the Southern African Development Community (SADC) region to develop effective anti-corruption strategies and to create synergies with other anti-corruption stakeholders.
Anti-corruption organizations aren’t the only ones striving to eradicate corruption in Africa. Many African governments are taking steps to eradicate it as well. Transparency International recently added these nations to their “least corrupt” list:
Cape Verde
Lesotho
Mauritius
Namibia
Rwanda
South Africa
Senegal
Seychelles
But Africa’s anti-corruption “superstar” might be Botswana, which has consistently topped Transparency International’s list of Africa’s least corrupt countries. Botswana’s federal government created the Directorate on Corruption and Economic Crime (DCEC) in 1994, in response to a string of corruption scandals. The directorate battles corruption through investigation, prevention, and education efforts. Since its launch, it has earned international praise for its innovative programs, which include outreach to youth and rural communities.
Today, the government can punish corruption with prison sentences up to 10 years, a fine of 500,000 Pula ($64,000), or both. The U.S. State Department reports that the Botswana government obtains 16 to 20 convictions a year for corruption-related crimes and has not shied away from prosecuting high-level officials.
Botswana shows us that one of the resource curse’s most damaging effects, corruption, can be defeated. The nation embraced its natural resources and created a positive culture in which to manage its diamond market, which is now the envy of the world. By turning away from the ills of the past, cutting red tape and graft, and investing their revenues into human resources, the country has achieved improved business rankings, increased incomes, and enhanced lives of the Botswanan people.
A vital piece of the anti-corruption puzzle is absolute transparency. And when it comes to transparency, we can learn a thing or two from Ghana.
The country is new to the oil and gas industry, very new. Their major find, the Jubilee Field, was only discovered in 2007. At that point, the country had zero experience in extractive technologies.
Perhaps because of this complete lack of experience, because the country had to work diligently to get up to speed quickly, Ghana took deliberate and calculated steps to ensure that its bounty of natural resources would be nurtured into something beneficial. Most importantly, the country set forth provisions to ensure the sustainability of the sector and safeguard the interests of future generations.
The Ghanaian government worked tirelessly to create the Petroleum Revenue Management Act (PRMA). When it was finally introduced in 2011, it established a comprehensive regulatory structure of reliability and accountability that includes some unprecedented transparency mechanisms:
Industry news and developments are published every month in national newspapers and on the internet.
There is a clear division between the state budget and oil revenue and a limit on how the government can use its part of its budget.
The Annual Budget Funding Amount controls the government’s share of oil and gas income; each quarter, up to 70 percent of the capital must be paid into the fund for strategic development.
The Petroleum Holding Fund, part of the Bank of Ghana, regulates the allocation of oil and gas revenue—and all revenue details are available to the public.
The people are encouraged to weigh in and debate whether spending conforms to development priorities.
A Public Interest Accountability Committee (PIAC) monitors compliance and provides independent assessment on revenue management.
The Petroleum Commission took over the supervisory role from the state-owned Ghana National Petroleum Company (GNPC), which was revamped to enable it to focus on upstream development.
How did this inexperienced government come up with what I consider the most effective and most transparent legislation for managing hydrocarbon resources on the entire continent?
It all started with education.
Instead of blindly jumping at the money, Ghana learned as much as possible about its new energy endeavor. The country reached out for advice from successful international partners. By applying the best practices of those who had succeeded before, and steering clear of their missteps, they avoided the need to reinvent the proverbial wheel.
In addition, the country focused on advancing its domestic training capabilities. For example, in 2015, the Kwame Nkrumah University of Science and Technology introduced its brand-new Petroleum Building and Laboratories Complex.
And last but certainly not least, the leaders of Ghana understood the importance of public approval. Ghana was already EITI-compliant with its mining industry requirements and qualified easily for its oil industry before the start of oil production in 2010. Over the course of that year, groups from various sectors held open forums to gauge the public’s understanding of the industry and to maintain the highest degree of public involvement and process transparency possible. These meetings brought together community members of all walks of life, from business people to farmers to schoolchildren, to really get a feel for what Ghanaians had to say about oil development in their homeland.
“In a small way, a social contract between citizens and government emerged,” wrote Joe Amoako-Tuffour, who served as a technical advisor on tax policy to Ghana’s Ministry of Finance and Economic Planning.11
I dare say that this was, on the contrary, no small thing but a very great and impactful step. Through unprecedented transparency, the government was proving its dedication to the people.
I see too much to talk about local content, but the results and focus on results must be a priority. Sometimes with local content, you have the feeling of an overcrowded field of preachers feverishly contending for the attention of the same choir. Too many people talk about local content with little knowledge of how the oil industry works or understanding that we need to find the right balance.
Local content policies are derived from a simple philosophy: A nation’s natural resources belong to the people, so the people should benefit from their development. Although the exact definition remains a bit elusive and fluid, fair opportunities for local communities remains the crux of the issue for many African countries.
The goal is to get more locals employed in the energy sector and to make more local companies suppliers to the industry. But just what does “local” mean? And just how local are we talking? Are we also including regional content from neighboring and nearby states (or from more distant African countries)? Furthermore, how can we all ensure that local and regional content becomes part of a country’s—or a region’s—everyday approach to doing business?
These questions highlight how complex the issue is. Take Nigeria’s Niger Delta, for example. Oil and gas operators are feeling the growing pressure to hire their workers and buy all products specifically from Rivers State. Or look at Tanzania, where researchers have found that, while residents appreciate local content efforts, they remain suspicious of the motives and the ultimate outcomes. This distrust stems from the government’s failure to consult with locals during the policy development process.
A further complication could be the perception of inaction. By that, I mean that local content policies do not—cannot—bring about immediate change. As with any new policy, it takes time to draft, implement, and notice. All stakeholders need to recognize that local content regulations are based on the principle of long-term improvement; the lack of an immediate increase in local hiring, for example, does not signal that reform is stalled.
Local content policy for the energy industry—or, really, any natural resource industry—must be dynamic. The oil and gas market fluctuates dramatically, and regulations must be able to accommodate this. Policies need to be designed to handle such change.
Plus, the extractive technologies change rapidly, and the training and education needed can easily surpass local capabilities. It’s just not realistic, for instance, to require that 100 percent of the labor will come from indigenous workers. That will simply serve to scare away potential investors. We can’t have our lawmakers establishing requirements so burdensome that companies don’t want to come to Africa. In short, we want companies to bring in the finances.
We want them to bring in the technology. We want them to bring in the job opportunities.
To a large extent, however, indigenous workers and supply industries have not historically reaped the kinds of economic and social rewards one would expect, and that’s the case even in African countries with bountiful stores of oil and natural gas.
Big companies—maybe oil and gas companies in particular—still have a lot of ground to make up to overcome the mistrust that has cultivated over the years, borne of the locals’ past experiences with less-than-honorable businesspeople. The best and most ethical approach to maintaining trust is by establishing open communication from the beginning and respecting the needs of the community as much as possible.
Yes, all businesses think about profits. But there’s so much more to be gained by helping the local environment in progress and development. Setting local people up for success will ultimately contribute to a company’s growth and profitability.
Do not underestimate the knowledge and determination of the locals. Overlooking the qualified local people is a missed opportunity. In fact, hiring expatriates might be one of the biggest mistakes that companies make in Africa. It’s an unnecessary expense, costly in terms of both paychecks and the wider repercussions on the community.
Let’s start with the presumption of national staffing. Make hiring locally, whenever possible, the standard rather than the exception. Let’s get into the position of nurturing future leaders who can put their considerable understanding of the area to work for the good of a country and for the good of the continent.
Two shining examples of local-content-done-right are in Angola and Nigeria.
I encourage African leaders to study the socioeconomic impact of Angola LNG in Soyo, a joint venture between Sonangol, Chevron, BP, Eni, and Total. Angola LNG has committed to providing social benefits to the community—like renovating the Soyo municipal hospital, refurbishing and expanding the Bairro da Marinha School, improving city roads, developing a new road and bridge connecting Kwanda Island to the Soyo Industrial Zone, and constructing a gas-fired power plant for the community.
The Angola Ministry of Public Administration, Employment and Social Security (MAPESS), meanwhile, has been providing vocational training that enhances the plant’s ability to benefit the community. The MAPESS Vocational Training Center in Soyo was built with the LNG plant in mind by the Angolan government with support from the Norwegian vocational education foundation RKK and the Norwegian government.
Also worth studying is Nigeria LNG Limited (NLNG). Incorporated as a limited liability company in 1989 to produce LNG and Natural Gas Liquids (NGLs) for export, the company is owned by the Federal Government of Nigeria, represented by Nigerian National Petroleum Corporation; Shell; Total LNG Nigeria Ltd.; and Eni.
NLNG estimates that it created more than 2,000 jobs every time one of its 6 trains were constructed, and it could create as many as 18,000 additional jobs for its proposed 7-train expansion. The company has also provided training opportunities for Nigerians and created 400 new jobs (captains, engineers, seamen, and ancillary workers) when it acquired six new vessels in 2015.
I must note that it is important to distinguish between local content and corporate social responsibility. People do not need handouts. They need to be appreciated for their contribution.
Of course, there’s more to local content policy than the drafting of it.
Local governments must share in the vision and have practical mechanisms for ensuring compliance. Without oversight, local content regulations can be easily “forgotten.” Just as detrimental are the drafts of local content legislation that are so loose that compliance is either practically guaranteed or downright impossible.
Case in point: Tanzania’s Production Sharing Agreement requires operators to “maximize their utilization of goods, services, and materials from Tanzania” without suggesting requisite levels of utilization or the mechanisms to accomplish this. Angolan legislation, on the other hand, is clearly outlined but sets forth different laws for different regions and lacks a single supervisory institution. Meanwhile, the Petroleum Law in Mozambique states that all oil and gas companies must be registered on the Mozambique Stock Exchange—but it fails to define “oil and gas companies.” It also stipulates that only foreign companies registered on the Mozambique Stock Exchange can carry out petroleum operations without clearly outlining what constitutes “petroleum operations.”
On the other hand, those with highly prescriptive policies are faring much better in terms of the kinds of successes they’ve achieved. The regional evidence paper “Local Content Frameworks in the African Oil and Gas Sector: Lessons from Angola and Chad” for ACODE, a Ugandan public policy research and advocacy think tank, determined that the more tightly woven the local content framework, the better.
No local content policies can be effective without the establishment of a fully empowered government regulatory agency to lead public enlightenment, communication, and education—and to take firm actions against defaulters.
And enforcement is, of course, essential to this success.
Nigeria is widely considered an example for sub-Saharan Africa. Nigerian local content laws, for example, are clearly spelled out: Milestones, percentages, and timelines are etched in stone.
Nigeria’s National Content Development and Monitoring Board (NCDMB) is a great example of a successful monitoring approach. In fact, the NCDMB has shown its teeth: It hasn’t shied away from ensuring compliance with the national local content policies. It made an example of Hyundai Heavy Industries by banning its participation in Nigeria’s petroleum industry until it proved its compliance with the requirements of local employment.
| Before Local Content | After Local Content |
Average Industry Spend | USD* billion | USD 20 billion (USD 4 billion locally) |
Contribution to National Revenue | 71% | 80% |
Contribution to Export Earnings | 90% | 97% |
Contribution to GDP | 12% | 25% |
Local Value Added | 10-15% | 40% |
Use of Workforce | More Expatriates | More Nigerians |
Source: Energy Synergy Partners, 2015
Best Practice for Local Content Development Strategy: The Nigerian Experience12
Realistic goals are also important in shaping policies and promoting success. Obviously, local content policies that are unfair or unreasonable will hold no water—and may, in fact, simply serve to inhibit the progress of the industry across the continent.
The strength of the local content policies in Equatorial Guinea, for example, is its balance: While its government understands that the sustainability of the country and the industry coincides with indigenous success, it also recognizes that the oil and gas industry is a highly technical segment that demands both highly trained staff and companies that adhere to the strictest guidelines for health, safety, and environmental protection.
The government enacted requirements for international companies to hire Equatoguineans, contribute to training programs, and work with local subcontractors. They were careful to balance the need to boost local industry, however, with the limitations of the current local industry. They understood how unrealistic it was to require 100 percent local content until more training, education, and local capacity in that field is created.
Building local content takes time, and until they have successfully created local capacity in the many sub-sectors it takes to service the oil and gas industry, there is a need for international firms. Equatorial Guinea struck this balance, such that international companies can trust the services provided by Equatoguinean companies, and indigenous companies have the ability to grow.
Successful reform initiatives, supported by both local governments and the private sector, are helping transform the continent’s prospects. But as Ernst & Young cautions, “Africa’s continued rapid growth is not inevitable, and will not simply take care of itself . . . We should not take belief in Africa’s rise for granted.”
Or consider the advice of Tanzania’s former President Benjamin Mkapa: “We have shown that it is possible. Now it is up to African countries to follow the example set by ICF and to pursue greater investment climate reforms that will spur Africa’s development and unleash the entrepreneurial spirit of its people.”
In other words, we can’t sit back, reveling at our early successes.
Natural resources only become a curse when poorly managed and when their extraction is done without proper supervision. Governance is the only deciding factor when it comes to a country’s natural resources becoming a curse or a blessing.