Fjords or tulips?
SA’S gas find, unless it’s used well, could spell a resource curse
As they prepare for another lavish wedding, this time at the five-star Emirates Palace hotel in Abu Dhabi, the Guptas must be contemplating news of a major gas find off the coast of SA with dismay.
If only they’d never used e-mail; if only the Zuma faction had prevailed at the end of 2017; if only SA’S judiciary and civil society hadn’t been so cussed … if only.
What a gravy train that gas find could have been for them and all the Zuma cronies — untold riches with not even the pretence of governance or oversight. The estimated R1-trillion find would have made everything else they had grabbed seem like chump change. And, because there’s nothing quite like striking oil, gas or gold to fire the imagination, there’s already talk of possibly another four similar finds in the area. Read it and weep, Tony, Atul and Ajay.
But before we get too excited about our lottery win, perhaps we should have a word with the guys at Shoprite. They’ve had first-hand experience of the darker side of “game-changing” oil strikes.
Of course, it needn’t be Shoprite — chat to anybody trying to do business in Angola or Nigeria. These are the two biggest oil-producing countries in Africa. They also happen to be two of the most corrupt countries in Africa. It’s not the corruption that’s causing problems for businesspeople — it rarely is — it’s currency devaluations and the near-impossibility of getting money out of the country.
Angola and Nigeria are extreme examples of just how devastating a wealth of resources can be for a country. Despite their resources, both are marked by widespread poverty, with oil being the only industry of any note in Angola, a country that is a caricature of the dirt-poor gambler who wins $10m in the lottery and five years later is again dirt poor.
Because the Angolan elite was so well taken care of by the oil industry, no attempt was made to develop a post-colonial economy that could provide for the country’s citizens.
A much milder form of the devastation wreaked on Nigeria and Angola is what is referred to as the Dutch disease, a term coined after the Netherlands suffered a massive decline in manufacturing following the discovery of major oil resources.
It is what happens to an economy when huge foreign exchange revenues from gas, oil, gold and so on bump up the exchange rate and make other sectors of the economy less competitive; there’s a consequent drop in exports (other than gas, oil or gold) and a spike in imports.
It is utterly remarkable that
Norway is one of the very few countries that has not succumbed to the Dutch disease.
It discovered oil in the North Sea in the 1970s and used the opportunity to stimulate productivity across the economy, in the process becoming a global supplier of oil and gas technology. And, instead of blowing the oil cash on consumption, like our dirtpoor gambler, it poured large amounts of it into a sovereign fund that is now worth over $1-trillion.
Whether we take the Norway route or Angola route depends on the quality of our institutions. Everything that has emerged in the Zondo commission points to the grim Angolan option; but the very fact that we have a Zondo commission encourages some hope for a Norwegian future.