Over 50 trillion cubic feet of offshore natural gas has been discovered in Tanzania’s waters in the past four years. While the country’s natural gas industry will likely remain in the exploration phase for at the very least another year or two, the International Monetary Fund (IMF) is projecting that once extraction is under way, annual revenues could be as high as $6 billion.
$6 billion per year stirs up hopes and dreams. Surely the expected revenues should translate to decreased fuel and food prices, expanded energy access, upgraded infrastructure, and improved education and health services for the over 40 million people who call Tanzania home. The country should finally be able to break free from decades of dependence on foreign aid.
$6 billion dollars per year also stirs up doubts and fears. The expected revenues may not positively impact the daily lives of Tanzanians in any meaningful way, given the country’s historical precedent for uneven distribution of extractive wealth in the mining sector. Then there is the terrifying possibility of being struck by the dreaded resource curse that has plagued many of Tanzania’s neighbors.
The process of bringing the gas to production and subsequently harnessing its benefits is fraught with contention. As is the case in most developing nations that are home to natural resources, foreign specialists have been called in to provide the initial capital and technical expertise necessary to operate the majority of the risky exploration procedures in Tanzania. To date, the major companies at the helm of the gas discoveries in the country are Norwegian-based Statoil, British Gas and Ophir from the United Kingdom, and U.S.-based ExxonMobile.
The Production Sharing Agreements (PSAs) between the Tanzania Petroleum Development Corporation (TPDC), Tanzania’s National Oil Company (NOC), and these international corporations have come under scrutiny. In May of this year, a major PSA between Norway’s Statoil and TPDC revealed that the contract did not adhere to the guidelines outlined in the model PSA set up by the government. Analysts’ estimation that this failure could result in the loss of over $12 billion in revenue for the Tanzanian government catalyzed intense public debate about the true recipients of natural gas revenue.
In September, the Tanzania Revenue Authority responded to mounting pressure by promising to renegotiate these agreements. Within three days, they backed down in an attempt to pander to investors. While it is heartening to see the public voicing their concerns and calling for all PSAs to be published, Tanzania’s long road to transparency will be marked by stubborn obstacles in the form of corruption and rent-seeking. Yet if Tanzania as a nation is to experience sustainable economic growth over the long-term, it is going to take some true soul-searching in the present to remove those obstacles.
The costs of failing to establish and maintain an atmosphere of relative transparency through adherence to appropriate policies and mechanisms prior to beginning gas production are astronomical. The current macroeconomic crisis in Ghana, spurred on by gross mismanagement of revenues from oil production begun in 2010, is just one example of how a country supposedly headed for middle-income status can quickly go wrong. Nigeria, despite boasting the continent’s largest economy in terms of gross domestic product, is perhaps an even starker example – over 50 years of oil extraction amidst rampant corruption and waste have resulted in stark inequality, an abjectly poor majority, intense violence, suffocating pollution, and a collapsed tourism industry.
Yet it is not enough to simply ensure that funds are not stolen, wasted or siphoned off by international companies or Tanzanian politicians. Beyond the questions of transparency and accountability, there is the related and equally important question of how to effectively harness natural gas revenues to create sustainable human development rather than simply industrializing. Rising violent crime and extreme inequality in South Africa, sub-Saharan Africa’s economic giant, are evidence of the dangers inherent in blindly pursuing a neoliberal development agenda without considering human development.
While Tanzanians may certainly be ready for a change, they would do well to maintain a sliver of their undying allegiance to deceased president, “Mwalimu” Julius Kambarage Nyerere. As he asserted in his book Uhuru na Maendeleo, “We can try to carve out for ourselves an unfair share of the wealth of the society. But the cost to us, as well as to our fellow citizens, will be very high. It will be high not only in terms of satisfactions forgone, but also in terms of our own security and well-being.”