Will petroleum end poverty in Africa?

Baha Erbas
Following World War II, especially from the 1950s on-wards, many African states, which had been suffering under the colonial system established by major powers of Europe for centuries, gained their independence.
For the last twenty to thirty years, economic historians, anthropologists and sociologists have been trying to discover why a continent that is claimed to possess the richest natural resources in the world is also the poorest and the most desperate region. In the introductory section of his book Empire, which brilliantly charts the rise and fall of the British Empire, Prof. Niall Ferguson of Harvard University tells in his distinctive style how European powers earned 777 trillion USD during the colonial era. Perhaps, the most amazing recent works on this issue are : Why Africa Is Poor" by Greg Millis; and New York Times best -seller Dead Aid by Dambisa Moyo, which has a foreword by Niall Ferguson.
The September-October issue of Foreign Affairs journal published by the Council on Foreign Relations contains an important article by Larry Diamond and Jack Mosbacher on the massive petroleum-natural gas reserves that have been unearthed in recent years in Africa ("Petroleum to the People"). Larry Diamond, a professor from Stanford University, is a well-known scholar with important works on Democracy and Human Rights issues— some of which have been translated into Turkish as well—and he acted as a consultant on these issues to the Interim Government of Iraq that was established after the invasion of Iraq by the US and also worked for the National Endowment for Democracy institution of George Soros.
The article by Diamond and Mosbacher emphasizes that calculations based on petroleum-natural gas exploration works in the recent years show that poor African countries such as Ethiopia, Kenya, Malawi, Tanzania, Uganda, Gambia, Ghana, Sierra Leone and Senegal will receive billions of dollars for their petroleum and natural gas reserves, but also cites examples of countries such as Sudan, Angola, Chad and Gabon, which also possess immense energy reserves and have been selling these to global markets for years, that are still struggling with poverty. The authors claim that an analysis of 'Development Models' reveals the following general situation in the last five decades in the world: petroleum rich countries failed to make good use of their resources for development, socio-economic strength, democracy and human rights and did nothing to alleviate poverty and prevent corruption. This is true for petroleum rich countries in both the Middle East and Africa.
In Equadorial Guinea, which has been exporting an average of 400 thousand barrels of oil per day since 1995 and has a per capita income higher than many developed countries— for instance, England, France and Japan— 75% of its population lives on less than 2 USD a day. Using striking examples, the authors point out that the abundant economic liquidity that is obtained from petroleum in a short period of time in countries which have revenue primarily from that source also causes rapid inflation, major public corruption and abuse of most of the population. They further claim that public resources are not transferred to economically essential areas, investment and development, and even more negatively the people do not benefit from the use of their country's petroleum riches. An immense socio-economic turmoil and inequality would be created, and energy resources have not even been used for the economic development of new businesses, and infrastructure. Diamond and Mosbacher also point out that the misuse of the abundant petroleum resources in countries such as Ethiopia, Gambia, Tanzania and Uganda will most likely lead to increased power for existing authoritarian regimes and that with the danger of civil strife and revolution in countries such as Kenya, Liberia, Senegal and Sierra Leone, institutions can very easily collapse.
The authors emphasize that energy rich countries that have gained major income thanks to petroleum for many years—for instance Angola, Equadorial Guinea, Nigeria and Sudan—are at the top of global poverty and corruption lists. In their article, the authors claim that 12 African countries will export 25 billion barrels of petroleum to global markets in the next decade and this amount would be sufficient to assure social welfare for even 1 billion Africans. As of 2008, proven petroleum reserves are as follows: 3,5 billion barrels in Uganda, 3 billion barrels in Kenya, 3 billion barrels in Tanzania, 4 billion barrels in Sao Tome Principe, 2 billion barrels in Ghana, 1,5 billion barrels each in Senegal and Liberia, and half a billion barrels in Ethiopia. These proven reserves have an actual economic value of over 3 trillion USD. When we consider that the total GDP of these countries was only 181 billion USD in 2011, and that these countries will receive minimum of 3 trillion USD in the coming 30-50 years, we can grasp the immense economic impact of petroleum.
These countries receive foreign aid of 1 USD on average for every 1,5 USD of their tax revenue. At least a quarter of the total public revenue comes from humanitarian aid from developed countries; and this number is over 50% for countries such as Ethiopia, Malawi, Liberia, Uganda, and Sierra Leone. If economists and politicians can learn how to properly manage these immense petroleum resources, the future would provide a dramatic story of an economic miracle, a difficult to envision hope for the improved welfare of Africa's vast populations.