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Africa urged to avoid morning-after oil hangover

by Staff Writers
Johannesburg (AFP) Dec 2, 2007
Oil-rich countries in Africa must resist the temptation to splurge their revenue from black gold if they want to avoid a hangover when supplies run dry, experts said at a conference in South Africa.

Oil has all too often proved a curse to Africa, greasing the palms of foreign firms and corrupt leaders, and while many countries are now improving the way they manage the resource, they also need to diversify their economies before oil runs out.

"Oil wealth is a mild toxin, much like alcohol. If you don't have a strong constitution it tends to make you unstable," said Diarmid O'Sullivan of London-based Global Witness' oil campaign at a two-day conference held by the South African Institute of International Affairs (SAIIA).

O'Sullivan said countries such as Angola, now the fastest growing economy in Africa off the back of its oil supplies, had proven reserves for less than 20 years.

"If that gets wasted through corruption and poor governance, that opportunity is not going to come around again. When the oil is gone, it's gone," he said.

Analysts at the conference said that the living conditions in many resource-rich countries were often worse than those who were not blessed with mineral wealth.

According to Alex Vines, head of the Africa programme at the Chatham House, Royal Institute for International Affairs in London, Angola is the world's leading importer of luxury vehicles such as Hummers even though some 70 percent of the population earn less than a dollar a day.

The southern African country is nearing a production of two million barrels a day, and is now one of the biggest suppliers to China, which is pumping huge investment into the country and helping to rebuild infrastructure shattered by a 27-year civil war.

However despite glaring inequalities, a previously non-existent middle class is slowly beginning to emerge between the wealthy elite and poverty-stricken.

"Angola's budget is estimated to be 31 billion dollars, yet its under five mortality rate is the second worst in the world today," said Vines.

In Equatorial Guinea, where the United Nations estimates 80 percent of national income is in the hands of five percent of the population, spending on social services like health and education have declined despite increasing oil revenues, said Vines.

Africa's largest oil producer Nigeria, which has made significant strides in improving transparency and cracking down on corruption, saw poverty increase from 30 percent of the population in 1970 to 70 percent in 2000, according to Vines.

Nigeria has opted to join the Extractive Industries Transparency Initiative, a coalition hoping to set a global standard for companies to publish what they pay and for governments to disclose what they receive.

With the massive commodity boom, good governance and well-managed natural resources could have a major benefit for Africa, but Vines warned countries need to diversify their economies as oil on its own will not raise them from poverty.

"Africa isn't Saudi Arabia. The oil in sub-Saharan Africa is finite."

The conference heard how very few countries rich in other minerals such as timber and fisheries were well managed, although South Africa and diamond-rich Botswana were identified as exceptions to the rule.

SAIIA chairman Fred Phaswana said signs of democratic change in the Democratic Republic of Congo, Sierra Leone and Liberia proved "reason for cautious optimism."

Calling for the international community to think twice before making investments that strengthen non-elected or despotic regimes, Phaswana also said the intensifying competition for African resources needed close scrutiny.

"The former colonial powers are being increasingly challenged in Africa by the emerging economic giants of China, India and Brazil. What is not yet clear is the impact this ... will have on questions of governance, sustainability and conflict."

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Tokyo wants gas exploration deal with China: official
Beijing (AFP) Dec 1, 2007
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