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Will it be a curse or blessing for Kenya?

Posted by Administrator on March 26, 2012

By Tim Wanyonyi

With the discovery of oil, Kenya is at a crossroads where it must take the highway to heaven or hell.

Imagine a country with a massive National Petroleum Investment Fund in which proceeds from oil sales are saved.

Profits from the fund are paid out as dividends to all Kenyans in the form of free education, health care, public infrastructure projects and stipend for the poor and jobless. Petrol is cheap and readily available.

Now flip the coin and imagine a country where petrol shortages are the order of the day, whose soils and water have been poisoned by leaks and whose politicians compete to steal oil revenue with impunity.

Worse still, unemployment is high and hundreds of people are regularly  burned in fires as they puncture pipelines in suicidal attempts to get a share of the oil.

Many countries in the world which have struck oil have been cursed with corruption, greed and political strife.

In Africa, Nigeria is the biggest  example.

The continent’s  leading producer has earned hundreds of billions of dollars from oil revenue since it was discovered 50 years ago yet a majority of its people are some of the world’s poorest.

Revenue from the resource is stolen by its rulers, both military and civilian. Whenever elections are called, oil money is used to steal them.

In the Delta region, where the oil is extracted, there is 90 per cent unemployment.

Today, Nigeria, despite its oil wealth is a country in danger of breaking apart because of tribal and religious unrest.

In Russia, the oil boom mostly enriched oligarchs. But the quality of life in Russia continues to deteriorate.

Saudi Arabia is the world’s biggest producer yet oil revenues tend to flow into the bank accounts of the royal family. Unemployment is at 25 per cent and the kingdom still resembles a poor third world country.

These are the countries that have been afflicted by the oil curse. Instead of this black gold helping them improve the quality of life for their people, it has caused suffering.

But not all oil producing nations are cursed and Kenya has a chance to choose which way to go.

Norway, a country of  nearly five million people is one great lesson on how to invest oil money. It has set up a fund that currently has an excess of $150 billion and is growing rapidly.

The Norwegians, the world’s third biggest exporters behind Saudi Arabians and Russians, have proven that oil doesn’t have to be an obstacle to stability and long-term growth.

The Petroleum Fund of Norway was set up in 1990 to function as a fiscal shock absorber. According to a BBC documentary, it is run under the country’s Central Bank and converts petrodollars into stocks and bonds.

But instead of paying dividends, it uses revenues and appreciation to ensure the equitable distribution of wealth across generations.

The key to getting the best from oil is getting the politics and governance right. Countries ruled by tribal kingdoms, authoritarian regimes, kleptocracies and military dictatorships have tended to misuse national oil revenues.

On the other hand, countries where there is democracy and more openness in the running of public affairs  do better.

In this regard, Kenya, with one of Africa’s most democratic constitutions, has a headstart.

It should be better off than Uganda, for example, where Yoweri Museveni is calling all the shots in the oil sector. But then again, Kenyan politicians have proven to be some of the most corrupt on the continent.


8 Responses to “Will it be a curse or blessing for Kenya?”

  1. Kangemi said

    Given the current tribalism and corruption tendencies of 99% of our leaders, this is an absolute curse. I have hoped for years that this day never comes. Singapore, Hong Kong, Japan, South Korea and Taiwan have achieved remarkable progress despite little or no natural resources to speak of. Unless there is significant change the nation’s attitude, we are definitely headed the Nigeria or Angola’s way. The oil companies will strategically corrupt a few leaders at the expense of the common mwananchi.

    • Skinny said

      Hi Kangemi,

      I understand where you are coming from but as the author stated, Kenya is in the right position to make this oil discovery beneficial to the people. While corruption is rife let us hope and pray that the govenment does the right thing. Nothing is impossible. Its about time for Africa to be shown in a good light. This is an opportunity to do so.


    • Netia said

      This oil smells of being a scam like Goldenberg, exporting of non-existing minerals via a shady company called Tullow (see their example in UG) and an excuse for looting by the robber barons who run Kenya. However If there is oil, Tullow after paying all those bribes and kick-backs will not want to sell that oil locally but would rather export it for refining and sold back to Kenya at market rates to recoup their costs. I honestly do not support the MRC but what they are agitating for is so radical it frightens the robber barons; an end to the cash cow that is Kenya as currently constituted. I can also confidently predict that the Turkana will lay aside cattle raiding and go the Niger Delta way and demand substantial revenues from the oil-fields (just like the Maasai and the Maasai Mara).

      • Kangemi said

        Well said Netia. Today’s Daily Nation has an article on a $10million bribe already paid to a crooked cabinet minister. The Robber Barrons/Oligarchs are well known and they must be losing sleep over how to decend on Turkana…. as if what they have looted is not enough…
        Many forget that we leave this world the same way we came, with nothing. Why can’t one make an honest living?

  2. Shortie (Kadogo) said

    I don’t believe anything they are saying. We have heard this stories before, especially during Moi era when Nicholas Biwot was the energy minister. What happened that oil? I would caution people not to be over excited over this so called discoveries. In Kenya we have a history of blowing things out of propostion. Remember the AIDS drug kemron supposedly created by Kenyan scientists at Kemri? It was big news with all sort of allegation and accusation on how the west was sobotaging Kenyan effort to market it. As it turned out, the drug did not cure AIDS thus tarnishing Kemri image. My fellow Kenyans, don’t be fooled by the hyperness of oil discovery in Turkana county untill its quantity can be established. Remember, oil can be found in almost every corner of the world. What matters most is its quantity and the depth to tap it from. Kenyans should hold their breath before getting excited!!!. Above all, they should investigate the history of Tullow oil company to see whether it’s upto something. They can use the small discovery they made to extract more money from the Kenya government in the name of doing more exploration. The company is already been investigated in Uganda over corruption. Also remember, major oil companies such as Shell and Exxonmobil has explored the same blocks before without finding oil.

    • Nairobian said

      I cannot agree with you more… traces of oil have been found all over the place. The question is… Is there enough to sustain production for at least 20 yrs? Exploring oil is pretty expensive. If there is no confirmation (from a reputable explorer) that there is a significant amount of oil, then the drilling might not be worth it.

      As much as I would like to get excited, I’m holding my breath on this one. Missouri all the way guys… “Show me”

      Side note: If they end up finding a significant amount of oil, even after the “big fish” steal their cut, Kenya will still benefit to some extend. Just like Angola. Anybody seen what Angola cities look like lately? The Chinese is doing wonders over there… and its all oil money…

      • Netia said

        I do some work in Angola and whilst there are some good developments, the real story is in the cost of living; that place is a nightmare in terms of prices for everything. There is no meaningful agriculture, no basic industries so yaani almost 80% of everything is imported. On the plus side for anyone with an entrepreneurial streak its the place to be coz they need products and services.

  3. Joseph K said

    Studio man
    oh men of our mothers. Is this not a shadow clound this kenya gov. want to confuse the mwananchi with oil discovery and forgot about what is much concerning.
    General election on time , no corruption , get lid of this fat cats of their lies when they smell cockroach they say its mouse
    No oil no more scam. We have been twisted enough Goldenberg. Angro. lease etc.

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