There’s no silver bullet to overcome the natural resource curse that haunts much of the globe. But countries in East Africa, the region I am most familiar with, can take several practical and affordable steps to exploit resources in ways that will benefit citizens and put realistic development goals within reach.
Here’s what they can do:
- Make the process used to allocate exploration licenses open and public. For example, ask members of the public to come forward with comments and objections before a license is issued to a particular company. Increased openness would reduce the risk of politicians issuing licenses to their relatives and associates. It would also defuse opposition from local communities as they would have a chance to communicate and secure their interests, thus preventing the rise of armed insurrections as has happened in the Niger Delta region of Nigeria.
- Make all existing Production Sharing Agreements (PSAs) public. It’s disturbing that PSAs in Kenya, Uganda, and Tanzania are classified documents protected by various secrecy laws. This means that it’s impossible for the public to determine the actual benefits from extraction agreements and to hold officials accountable. This unnecessary area of darkness encourages corruption.
- Make sure the proceeds of natural resource agreements benefit the citizens and don’t harm the economies. There is a risk that East African countries could experience the so-called “Dutch Disease” where large amounts of revenues make their currencies too strong too fast, thereby rendering exports too expensive.
- Establish sovereign funds which manage natural resource revenues, and release the funds into the economies gradually.
- Update tax laws to take into account the peculiarities of the extractive industry and avoid lengthy court cases that prevent extraction.
- Invest in infrastructure to facilitate the extraction, transportation and processing of the natural resources.
Extractive companies and foreign governments can also play a more positive role.
We’ll talk about that in the next post.
Michael Ndichu Kuria is a contributing editor of the FCPA Blog. He’s a counter-fraud and counter-corruption consultant currently active in the East, Central and Horn of Africa regions. He conducts anti-bribery compliance reviews, forensic audits, fraud and misconduct investigations, integrity reviews, fraud risk management, procurement policy compliance reviews, and controls assessments. He has also designed and reviewed anti-money laundering and counter terrorist financing systems for various public sector and private sector clients across the East African region. He can be contacted here.