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September 23, 2018

Oil In Kenya: A blessing or a curse?

David Karimi is a risk management expert.
David Karimi is a risk management expert.

In the recent past, Kenya has been hit by both negative and positive news. On the downside, several corruption scandals have hit the country from various sectors of the economy. Given that most of these scandals have been happening within public institutions, it is no surprise that ordinary citizens have lost confidence in public institutions due to this misuse of entrusted authority for personal gain. On the upside, there’s also been great news as Kenya’s ambition to become one of the global oil producers was boosted following the flagging off of the first barrels of the resource destined for Mombasa from Turkana fields. The question begs: shall the discovery of oil in Kenya be a blessing or a curse?

For most Kenyans, the long-term expectations are that exploitation of this resource shall lead to economic growth, consequently assisting in poverty eradication in the country. However, studies show that oil-producing countries do not receive the economic and social benefits expected from the wealth generated by the hydrocarbon industry either directly, through the stimulation of the local and national economy, or indirectly, through increased tax revenues, a phenomenon referred to as the resource curse.

 Resource curse is a form of economic decline that can arise from conditions such as weak controls on public expenditures; increased corruption; and increased political and economic dependence on the income provided by the production and exporting of the natural resource. Africa has provided many instances where natural resource greediness such as that of minerals or crude oil has led to political instability, corruption and even civil war. Instead of serving as development agent, natural resources have served as propellants of internal conflicts in Africa as it is seen in the prolonged internal conflicts in Sierra Leone, Liberia, and the Democratic Republic of Congo who are all endowed with natural resources.

Natural resources and other windfall gains lead to an increase in fighting activities if there are multiple rivalling groups. Conflict would arise in cases where certain groups are seen to prosper from these gains at the expense of others. In the case of Kenya, Turkana County – where the oil was discovered – is one of the poorest regions in Kenya with 88% of the people living below poverty levels. Illiteracy levels are also high. The national & county governments should ensure that proceeds from the oil bring tangible benefits to the locals, to avoid a situation such as the one in Nigeria’s Niger Delta.

Otherwise, with the current trend of high levels of corruption, wrangles between the national government and county governments of Turkana area, lack of accountability from our leaders, constant politicking that destabilises the country and decreased quality of institutions, oil exploration is destined to be a resource curse for the country.

 

David Karimi is a risk management expert.

 

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