Poverty, Politics and Petrodollars: Demystifying the Interplay!

“Since the 1950s, many development economists have believed in the power of natural resources to lift developing countries out of poverty”- Svetlana Tsalik of Open Society Institute

The polemic of the resource curse has been the subject of debate by scholars for several decades and has as well generated considerable academic efforts. The idea behind the resource curse is that abundant natural resource does not necessarily translate into growth and poverty reduction. This phenomenon is known to be in sharp contradiction of the basic laws of economics since more natural resources should offer more economic gains and far-reaching opportunities.

In particular, it is for a fact that resource wealth lowers economic growth, exacerbates the risk of conflicts, civil wars and gives rise to increased social divisions, poverty, inequality and corruption. This is especially true considering the backwardness of economics including Nigeria, Equatorial Guinea, Angola, Venezuela, Angola, and Indonesia despite the abundant resource wealth. Given this premise, the political and social are inextricably intertwined with the economic and technical in the oil sector. This has established the interesting interplay of poverty, politics and petrodollars in most economies.

In Nigeria, despite the 40 years of petroleum exports (of which about $340 billion earned), living standards have plummeted and an estimated 70 percent of the population lives on less than s dollar a day. Gabon, sub-Saharan Africa’s fourth biggest oil producer and the world’s third biggest supplier of manganese still has an estimated population of 1.5 million living below the poverty line.

It goes without saying that the intertwined actions of poverty, partisan politics and misguided expenses of petrodollars have brought nothing but miseries to people in oil-producing countries especially in the Africa region.

It is against this backdrop that issues surrounding poverty, politics and potential petrodollars that Ghana would garner should be brought under scrutiny if the country aspires to be a vibrant oil-producing economy. This article presents an analysis of Ghana’s fate in handling the deadly threats of the combined efforts of politics and petrodollars that give rise to increasing poverty levels. What makes Ghana so exceptional in eluding these nagging challenges that have overwhelmingly imprisoned the economies of Nigeria, Venezuela, Indonesia, and you could keep adding to the list?

The Thorny Issues

History paints a grim picture of how poverty has associated with resource-rich countries. Considering the performance of 48 countries for which oil comprised more than 30 percent of total exports between 1965 and 1995, nearly half of these scored in the bottom third of the United Nations 2002 Human Development Index (Follow the Money: A Guide to Monitoring Budgets and Oil and Gas Revenues by Jim Shultz). In the Africa region, this is even pernicious to sustainable efforts. According to the United Nations 2008 Human Development Index as stated in the 2009 Human Development Report, Chad was among the poorest countries of the world ranking 175th position of 182 countries (with a score of 0.392). In furtherance of this awful happening, Equatorial Guinea ranked 118th position (with a score of 0.719) of the 182 countries of the United Nations 2008 Human Development Index, which is indeed nothing to write home about.

In essence, poverty has been an inseparable entity in oil exploitation. The CIA World Fact Book estimates that 28.5% of Ghanaians are living below the poverty line. The question that deserves to be asked is that would Ghana’s petrodollars exacerbate extreme poverty? At least, the economy is not new to the ravaging effects of chronic poverty. Already, the country’s position of the HDI is not satisfactory and whether or not oil would improve the country’s score would be difficult to ascertain.

The issue of politics in oil exploitation has sparked unprecedented debates as to whether or not the resource curse can be broken. The logic of this is easy to understand. Corruption, non-democratic tendencies, civil wars and weak institutional capacity are largely linked to the state of a country’s political environment. In little Gabon and Equatorial Guinea, according to evidence for a French anti-graft hearing, petrodollars have eluded the people to simply funding elites' luxury villas and sports cars. According to the World Bank, oil revenues in Equatorial Guinea increased dramatically in value from US$3 million in 1993 to US$190 million in 2000 and US$3.3 billion in 2006 and yet the boom has not been translated into positive human development outcomes, which remain poor. Equatorial Guinea, according to the 2008 Corruption Perception Index, ranks 171st position with a score of 1.7 out of 10, just a point above Chad.

With the issue of politics, the abuse of human rights has been devastating. In 1999, Human Rights Watch reported of repeated incidents in the Niger Delta in which people were brutalized for attempting to raise grievances concerning the oil companies and found that Royal Dutch/Shell was paying for government security forces implicated in human rights abuses. This is an instance of militarization on the part of multinational oil companies in the sub-region. Most noticeable is the 1995 incidence in Nigeria when the then-president, General Sani Abacha, executed writer Ken Saro-Wiwa and eight other activists from the most effective community organization in the Delta, the Movement for the Survival of the Ogoni People (MOSOP). It is reported that no credible evidence was found for the crimes for which they were tried (Human Rights Watch, “The Price of Oil”, 1999).

When communities protest, governments, whether authoritarian or democratic, respond with force, as mostly government-sponsored public or private security forces act to protect oil operations and the future revenues of the state.

This is just a snapshot of the abuses that pertain in the oil sector. The uprisings of the Movement for the Emancipation of the Niger Delta (MEND) and the Front for the Liberation of the Enclave of Cabinda (FLEC) especially during the recent Africa Cup of Nations in Angola send the strong signal that oil offers no guarantee for economic development and stability.

In all, petrodollars that an economy garners provide the nexus to the poverty and “dirty” politics. In Chad, there was reassignment of mandated oil revenue expenditures for security purposes when majority of the people continue to reel under the threats of abject poverty. With the advent of the significance of petrodollars, leaders have little incentive to transfer power but has entrenched their rule may be till they die.

Scrambling for the Best in Oil

As much as the country is aspiring to commence commercial production in the last quarter of this year, there are still gray areas that need to be considered to avoid similar fates in most African countries. Definitely, the country should stay guard on the interplay of poverty, politics and petrodollars. In all, the legacies of transparency have served to soothe economies from these deadly threats. And unless Ghana increases commitment to the implementation and advancement of the Extractive Industries Transparency Initiative (EITI), the country would be no different. As the bedrock for prudent policies, Ghana should seek for clarity in legislations that would govern the oil and gas sector. These include, inter alia, the proposed Petroleum Revenue Management and the regulatory framework to govern the sector. Ghana has no reason to obscure information regarding contracts and revenue streams. What remains pertinent is that in concealing information, the country would be doing so at her own risk.

It is without doubt that the antidote for all African resource producing economies in transparency and stringent accountability. The fact that the political economy of revenues from the oil sector is idiosyncratic in each country can be challenged. It is not by miracle that Norway, Chile, Canada and Australia are known to be “Paragons of Plenty” when in less developed countries prevalently in Africa is known to be true worshippers of the “Paradox of Plenty”. African economies including Ghana should uphold the principles of transparency in the national and sub-national levels with regard to fiscal distribution and prudent management of oil revenues.

Oil should not be seen as an opportunity to create a few rich people who happen to sit on top of oil funds. Rather the exploitation of resources in Ghana and Africa at large should be seen as an opportunity to transform the whole society. This is only possible when our leaders change their attitude. There should be no room for the display of personal aggrandizement to the total neglect of the majority poor. It is important to note that the proliferation of opacity accounts for the mishaps in the oil and gas sector where communities and people have been made unlivable and poor respectively.

The fact is that petrodollars have tended to be catalyst for increased poverty because of the reckless handling of oil resources that portend a future that is full of far-reaching socio-economic and political challenges. Definitely, believe in the power of natural resources to lift developing countries out of poverty is far more restrained.

Conclusion

It is about time Africa took a hard look at itself and changed the whole fiscal and legal environments that surround the mining, and oil and gas sectors. Indeed, the change for the African continent is now! Ghana is entreated to follow suit the models of Norway, Trinidad and Tobago, Chile, Canada and Australia. Ghana has enough lessons to guide her in the expedition for prudent oil-resource management. The country cannot better approach the oil sector with the type of politics we see today. We ought to change the direction of politics in the country to follow the strategies of better management of petrodollars. Petrodollars have the potentials to lift the economies of Africa especially Ghana from unsavory reputations and nagging development challenges. In the same vein, petrodollars can corrupt all corners of governance and economic structures on one side and deepen the woes of majority people on the other side. That is what the interplay of poverty, politics and petrodollars can offer for an economy. Poverty, politics and petrodollars can have “marriage of convenience” to support sustainable development efforts.

The author, Stephen Yeboah is the National Co-ordinator for Osagyefo Network for Rural Development, an NGO based in Kumasi [email: stephenyeboah110@yahoo.com]