8/12/2019 Turning Resource Curse Into Opportunity

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  |  Nairobi Business Monthly   June

INSIDE

Insights

Working from home is becoming more popular because it is cheaper, convenient and more

comfortable. Unlike working from the formal o ffi  ceenvironment, there is very little supervision.

 IDEAS

FEATURE: SOCIETY & CULTURE P.56

Be vigilant about the

resource discovery process.

There are good and bad ways

of discovering resources.

Good practices are to gather

and analyse geological infor-

mation, so that the govern-

ment is properly informed

before it begins negotiations

with extraction companies.

Rule of thumb: Don’t

sell prospecting rights at

once and don’t sell them

without time limits. Use a

competitive and transparent

process.

Analyse

information

Take care

of locals

Value the

resource

Think of

prosperity

Assets to

acquire?

Resources under the ground

are a sovereign assets

belonging to all citizens,

and the profits should be

shared. Local communi-

ties should not have the

right to veto a decision on

resources; avoid a repeat of

the Niger Delta. All environ-

mental damage should have

full, generous and reliable

compensation.

Rule of thumb: Set up

a system for credible

compensation, and then

allow full and transparent

participation in benefits by

all citizens.

Capture the value of the

resource for society.

Resource extraction doesn’t

generate jobs for the host

country so the country needs

to generate value for itself by

developing and implementing

a good tax system. How can

one eff ectively harness natu-

ral resources? Set up rules

to ensure sound economic

decision-making and build

dedicated institutions to help

reinforce the rules.

Rule of thumb: A good tax

principle is taxation that you

can observe, he says.

Balance the benefits to the

present generation and the

benefits to the future gener-

ation. Create a critical mass

of citizens who know and

understand the rules and

issues. Resource discover-

ies will not last long. For

instance, Uganda’s oil wells

have been projected to last

for around 25 years.

Rule of thumb: The

proportion of assets that

is dedicated to savings

and investments should be

balanced with the propor-

tion that is invested in

consumption.

Norway handled the discov-

ery of oil very well. It bought

foreign assets. This was a

sensible decision for them

because the country already

had enormous capital

investment, but it would

be foolish for Africa which

needs capital locally. Africa

needs to build the capacity

to invest well.

Rule of thumb: conduct

a cost and benefit analysis

on every project. Look at

design, selection, imple-

mentation and, most impor-

tantly, evaluation.

— Compiled by Aamera Jiwaji

 1 3  2 4 5 

British economist Paul Collier, and

author of The Bottom Billion and

The Plundered Planet , gave the

keynote lecture at the Thomson

Media Foundation training. He

outlined the FIVE steps Kenya can

follow to avoid the oil curse.

The whole chain from step 1 to

step 5 has to go right, and for a

whole generation, if Kenya is to

pull itself out of poverty. Kenya has

approximately five years before

the oil comes out of the ground

and this time needs to be used to

build capacity for investment, to

scale up existing investments and

not to consume.

For instance, Ghana is saving

30% of oil revenues for future

generations. Norway did a similar

thing. They invested in pre-school

education. As Kenya gears up for

national elections, our political

parties need to commit not to how

much they will spend but how

much they will invest.

Turning a resourcecurse into opportunity 

Brie fi ng