Dutch disease hits W Africa

27/07/2003 09:27 - (SA)

news24.com

Paris - The oil-rich Gulf of Guinea, recently shaken by a coup on the island state of Sao Tome, is one of the regions of the world most affected by the so-called Dutch disease - political and economic instability resulting from overdependence on a single resource.

Named after a trend first noticed in the Netherlands following the discovery of North Sea natural gas, Dutch disease refers to the widespread economic decline that can ensue after rapid development because of an exported natural resource.

"The existence of oil revenues tends to make other economic activities, agricultural or industrial, uncompetitive and makes them disappear," said Philippe Copinschi, who is writing a thesis on African oil.

"There's no motivation to develop diversified economic activities because oil brings in immense revenues in an almost automatic way," he said in an interview with French newspaper Questions Internationales.

"This situation is even more perverse insofar as the oil industry does not offer work for jobseekers," he said.

The main oil producers in western Africa are Nigeria, an OPEC member that produces two million barrels per day, Angola, with one million barrels per day, the Democratic Republic of Congo, Gabon and Equatorial Guinea, each with about 300 000 barrels per day.

Chad joined the club earlier this month with the opening of an oil pipeline that brings its crude to a port on the coast of Cameroon.

Sao Tome, where mediation helped put an end to a week-long coup last week, is preparing to auction off with Nigeria nine potentially lucrative offshore exploration blocks amid widespread frustration on the islands with poverty and empty promises for better days to come.

Oil for US

The region has come under the spotlight since the United States, the biggest oil consuming nation, decided to diversify its sources of foreign crude away from the Middle East in the wake of the September 11 terrorist attacks.

Washington's goal was to raise sub-Saharan Africa's share of the US oil supply to 25% by 2015 from 15% currently.

Although African oil costs more to produce than that from the Middle East, it is geographically well placed for export to refineries on the east coast of the US.

Also, because muvh of the oil is located offshore, production is not disturbed by the frequent conflicts in the region.

But oil booms in the region often turned to bust for the local populations.

Weak governments and endemic corruption have made the region "without doubt one where the impact of oil has been the worst," said Jean-Pierre Favennec, an expert at the French Petroleum Institute.

In Angola, oil revenues helped finance a war against the Unita rebels.

In Nigeria, the situation is considered to be less dramatic but nonetheless turbulent.

"But Nigerians were richer in 1960 before the discovery of oil than now," Favennec said.

Largely because of the situation in Africa, non-governmental organisations launched a campaign last year called "Publish what you pay", calling on oil and mining companies to reveal what they have paid to governments in return for commerical favours. - Sapa-AFP