Natural resources and chronic poverty in East Africa

“If we are walking on gold, then why are we so poor” – sentiments of a Ghanaian Elder

Development Initiatives’ Africa hub hosted its first Africacounts round table forum on 3 July 2012. The purpose of the forum was to stimulate honest and constructive dialogue about the potential role natural resource revenues can play in addressing poverty, deprivation and inequality in the East African region. The outcome was the production of evidenced-based and inclusive policy messages to influence the use of East Africa’s newfound natural resource wealth for eradicating extreme and chronic poverty. It was a multi-stakeholder forum that converged key policy makers from government, civil society, the media, academia and other citizen representatives in Kenya.

The forum situated the discovery of natural resources such as oil in Kenya and Uganda and natural gas in Tanzania within a poverty context, highlighting the potential impact that these resources and revenues could have on development in the region. Participants discussed the history of natural resource extraction on the continent and the prospects for East Africa.

Four key issues emerged from the discussions to inform policy decisions in the region:

I: Develop robust fiscal policies to facilitate the effective management of emerging natural resources in order to optimise the opportunities that they could bring.

“The answer to effective utilization of East Africa’s natural resource find to address poverty and the pressing developmental challenges lies in treating the discovery of oil and gas as a public finance management issue.”

Henry Rotich, Ministry of Finance, Kenya

There needs to be reform within budget structures to allow flexibility in revenue allocation and in order to prioritise key development issues within pro-poor sectors. Suggested ways forward:

• expand the oil footprint in the economy instead of focusing on oil revenues as the driver of growth and for delivering public goods
• design and execute effective tax regimes that maximise on revenues from investors but also maintain a reasonable tax package to enhance the citizen stake in governance
• challenge the state’s role in the management of emerging resources and develop alternative modalities for managing and sharing the proceeds from natural resource discoveries
• increase citizens’ stake in oil production through the institutionalisation of mechanisms for key stakeholders, such as citizens and the government, to invest in the whole value chain in oil production.

 ‘”Why must the state dominate the management of  emerging natural resources? Could we think outside the box?”

Kwame Owino, CEO, Institute of Economic Affairs

II: Open information and increase civil knowledge. East African countries should commit to putting information about emerging natural resources into the public domain so that processes and procedures are more transparent. Greater effort needs to be made to enhance e-governance, develop open data initiatives and formulate right-to-information legislation.

 “Put information about the actual oil find, terms entered into, agreements with multinationals and modalities for monitoring flow of revenue to the public… [...] Oil needs very careful control, open consensus with the public. [...] It is cash, a key foreign policy commodity.”

Charles Abugre, UNDP

III: Develop and maintain laws, effective institutions and policies capable of managing resources, regulating exploitation and ensuring maximum benefit for citizens. The function of a legislative and institutional framework should be to regulate revenue-sharing formulae, tax regimes, policy and legislative space for civil society organisations (CSOs) and citizens’ representatives. Without such regulation, profits from natural resource discovery can often lead to poor governance and corruption.

“Petro-dictatorship:  Oil and gas find might herald an era of strong dictatorship in East Africa..”

Kwame Owino, CEO, Institute of Economic Affairs

IV: Increase citizen engagement in CSO and media space.  There has been significant expansion in public engagement and participation in recent years. This emerging space provides an opportunity for CSOs and the media (especially new media) to play a critical role as citizen representatives to ensure that policy makers prioritise their needs when overseeing the management of East Africa’s natural resource wealth.

“Civil society, social justice activists and the media (including social media) shouldn’t wait for government to pass laws then complain.”

Robert Alai, Blogger Techmtaa,  Kenya

The media and CSOs need to ensure that governments are held to account and are transparent about natural resource revenues. They must be proactive in influencing government action such as challenging malpractice, pushing through policy suggestions, proposing new or revised legislation in order to maximise the benefits of natural resources in addressing chronic poverty. 

“We have been unable to effectively utilise what we have: that’s why we are poor.”

Okoiti Okiah Omtatah, Social Justice Activist

A number of resources are available from the Round Table forum such as a detailed outline of the four point policy paper; a briefing paper on natural resource discovery in the East African region and the introductory PowerPoint presentation.

The next Round Table is due to take place in October 2012 – details to be confirmed.

This article was written by Kenn Okwaroh, our analyst  based in the Africa hub, Nairobi. For more information please email Kenn.Okwaroh@devinit.org