The Dutch Disease in Africa

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In “Untapped: The Scramble for Africa’s Oil” (Harcourt, 336 pages, $25), John Ghazvinian visits a supermarket in the oil-producing West African country of Gabon. French cheeses and foie gras are for sale, but he can’t find bananas. He asked a store clerk for bananas, “Pas des bananas,” the clerk replied. No bananas. Not in the supermarket, nor in the local markets. In his week and a half in Gabon, the author feasted on beef bourguignonne and potato au gratin, but he never found a bunch of bananas. And yet, Gabon is largely virgin rainforest, filled with banana trees.

Economists have named this paradox the “Dutch disease,” which refers to the impact on a country’s exchange rate once it starts selling a valuable commodity, like oil, on the international market. As large amounts of foreign exchange flood in, the value of the country’s own currency rises. Imported products become cheaper, and everyone rushes to buy foreign goods rather than local bananas and cassava. This isn’t a problem until the oil runs out, and a developing country finds itself without a traditional agricultural or manufacturing sector to fall back on.

The rapture of “Untapped” is that Mr. Ghazvinian explores this and other impacts of oil production on Africa — and strips away the turgid jargon to unveil the human stories underneath. He accomplishes this by traveling to 12 different African countries in order to learn first-hand how the rapidly increasing extraction of “black gold” is affecting people’s lives.

Before departing, he establishes the geopolitical context in which international oil companies are descending on Africa. Since 1990, the petroleum industry has invested more than $20 billion in exploration and production activity in Africa, in part motivated by America’s keen interest in Africa as an oil-producing region. An intelligence report produced in 2000 predicted that the region would provide 25% of North American oil imports by 2015, up from 15% at the time.

Mr. Ghazvinian explains how oil has undermined meaningful development in four of Africa’s long-term oil producers — Nigeria, Gabon, and Angola — as well as in the region’s newer producers, such as Equatorial Guinea, Sao Tome, Mauritania, and Chad. He adumbrates the impact of multiple actors in these gloomy stories: the corrupt African dictators who mismanage and sometimes steal oil revenue, the western governments that tacitly support such regimes, the oil companies that survive by cozying up to these governments, and the banks that shelter the assets looted from state treasuries.

The narrative begins in Nigeria, Africa’s largest oil producer. By now, many Americans are familiar with reports about the pipeline explosions and militia kidnappings of foreign oil workers in the Niger Delta. Since independence in 1960, a string of corrupt military dictatorships squandered the nation’s oil wealth. The “democratic transition” in 1999 has done little to raise the standard of living. Today 57% of the people live on less than $1 a day. Unemployment is high. Access to electricity, education, and health care is limited. Mr. Ghazvinian travels to the Niger Delta’s mangroves, which seeth with poverty, anger, and weapons. Militias, which he calls the “Nigerian Cosa Nostra,” steal crude oil from pipelines and sell it on the black market, often with official complicity.

Mr. Ghazvinian’s most astonishing reporting relates the situation in Equatorial Guinea — an oil-rich country, called “Africa’s Kuwait,” that is ruled by Brigadier General Teodoro Obiang Nguema Mbasogo. A western diplomat calls General Obiang “a known murderer.” Mr. Ghazvinian describes the final destination of Equatorial Guinea’s oil riches: General Obiang’s lavish $2.6 million mansion in Potomac, Md., and his son’s $35 million mansion in Malibu, Calif., where he runs his hip-hop label, TNO Records. A 2005 Senate report disclosed that as much as $700 million of the government’s treasury deposits were held at the Riggs Bank in Washington, D.C., with the president, his son, and nephew as the three persons required to sign for the account.

Given these sepulchral stories, is there any reason for hope? Although Mr. Ghazvinian closes on a more optimistic note, he does not delve into the story of an incipient global movement calling for greater transparency and accountability in the use of oil revenues. This movement — Publish What You Pay — has called for government revenues and spending to be opened to public scrutiny, so that civil society groups can help ensure that oil income serves the public good. One result of this activism has been the creation of the Extractive Industries Transparency Initiative, which is a set of operating principles designed to open oil and mining revenues up to public scrutiny. Western leaders could assist this initiative by passing laws that require oil companies listed in their countries to fully disclose their payments to developing governments.

Mr. Ghazvinian has a keen eye for the irony, dark humor, and complexity of people and events. I laughed with pleasure at his description of a bus trip from Nigeria’s commercial capital, Lagos, to the Niger Delta city of Port Harcourt, in which a young woman leads the bus in a rendition of a gospel song and then returns to reading her hard-core erotic fiction. His gift for transforming statistics into informative and entertaining sketches ought to make his book a must-read for anyone interested in Africa — especially for the policymakers who even today fail to understand the complicated and tragic consequences of Africa’s oil.

Ms. Sieff is the research associate at Revenue Watch Institute, a nonprofit organization that promotes the management of oil, gas, and mining revenues for the public good.


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