Oil exportation: How we can avoid the ‘black gold curse’
By Dennis Waweru | October 20th 2019
In a historic event of great significance for the Kenyan economy, we recently became the first East African oil-exporting nation after a tanker of commercial petroleum was shipped to Malaysia. The low sulphur crude was extracted in Turkana County then brought to Mombasa.
The 200,000 barrels were purchased by UK based company ChemChina for Sh1.2 billion, a price higher than what was initially projected. This means there is major potential for future profitability.
The biggest question about the future of Kenyan oil is whether or not Kenya will be able to turn this into a money-making industry for the long term benefit of our economy. And the livelihood of the current adult generation is not the only thing at stake. How petroleum exports are managed now could affect the bulge of young Kenyans for generations to come.
President Uhuru Kenyatta should obviously be well aware of this. Across other regions of Africa, the curse of black gold is well documented.
A government discovers that its earth is oil-rich and begins to drill and export, soon making billions.
Then it can choose to go in either of two directions.
The first is employing principles of good governance to set up a sovereign wealth fund, or reinvest the money into infrastructure and other development projects so that the wealth is shared and spread around. This is the prudent, high-return path to take.
The second path is one of corruption. In this case, profits generated would soon line the pockets of a few elected officials and powerful businessmen with the right connections. This would stifle the potential that any oil wealthy country has to become a prosperous country for all.
In many of the Arabian Gulf States, for example, citizens enjoy a high standard of living because their governments set up sovereign wealth funds. In Algeria, on the other hand, citizens do not benefit from the petroleum resources of their land, because corruption has taken it away from them.
Luckily, the government is cracking down on corruption more than almost anything else. The President himself was present at the Port of Mombasa when the Celsius Riga took off for Malaysia with the barrels in tow.
Speaking at the flagging off event, he discussed his commitment to use Kenyan national resources for sustainable development, forming a basis for economic strength many years into the future.
The Early Oil Pilot Scheme (EOPS) kicked off in June 2018 with the goal of developing Kenya’s oil and gas resources. Now, only a year later, EOPS has proven to the world that Kenya has the right knowledge and infrastructure to produce commercial quantities of oil.
Uhuru noted that the next step is constructing a pipeline from Lokichar oil field in Turkana to the new Port of Lamu.
He also noted that local communities in Turkana have already begun to benefit through employment in logistics and productions, as have those involved in the maritime shipment - another industry that the President has been cultivating in recent months.
The presidential task force has suggested setting up a Sovereign Wealth Fund to manage revenue from all national resources.
In response, the National Treasury instead suggested setting up an account that the Finance Minister would have access to.
However, the idea behind the Sovereign Wealth Fund is for it to be independent from the Finance Minister. By doing this, the Government would only have access to interest earned by the fund and would protect the money for future generations - rather than endangering it with the hands of corrupt officials.
Now that the first round of oil has been drilled, purchased and shipped, we must secure future wealth generated by natural resources.
Uhuru encouraged the new seafarers onboard the Celsius Riga to “serve with professionalism, dignity and integrity” in order to shape Kenya’s reputation around the globe. With so many development-related changes occurring right now in Kenya, this is a pivotal time for us.
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