Avoiding the resource curse: has Tanzania learned a lesson from the resource-cursed countries?  

The recent discoveries of natural gas in Tanzania raise the estimated proven reserves to 50.5 trillion cubic feet. This has been received as good news for the Tanzanian economy. However, the country’s natural endowment raises concern about negative consequences of extractive industries, also known as the “resource curse”. 

The resource curse refers to the situation where, in countries such as Nigeria, Sudan, Equatorial Guinea and Angola, oil and gas resources are associated with slow economic growth, abject poverty, political instability, rampant corruption and authoritarianism. By contrast, however, there are many examples of resource rich countries, for example, Norway, Australia and Canada that have been able to avoid the resource curse. This implies that governments can avoid the resource curse by improving the quality of governance and the competency of their governmental institutions. With the benefit of hindsight, and these countries as examples, the government of Tanzania should follow a pragmatic approach to avoid the resource curse syndrome.

One of the best methods that can help to avoid the resource curse is to have in place mechanisms for holding those that exercise public power accountable. Accountability entails the creation of rules and institutions that act as watchdogs (gatekeepers) for the exercise of public power. The mechanisms of accountability ensure that the exercise of public power by public officials, including politicians, is in accordance with the law, in the best interests of the people and any breach of the law or abuse of power is redressed through sanctions.. These accountability mechanisms limit (or minimize) the chances for corrupt practices and abuse of power when extraction rights and tax incentives are granted and when revenue is collected and expended. 

In Tanzania, the newly enacted Petroleum Act 21 of 2015 has three important features that can prevent the occurrence of the resource curse. First, it creates the agent-principal relationship between the government and the people of Tanzania. Section 45(1) of the Act vests the title to oil and gas resources in the government to be held on behalf of and for the benefit of Tanzanians. In this regard, the government, through the Tanzania Petroleum Development Corporation, has an exclusive right to control access to and utilization of the oil and gas resources. 

Second, section 251 of the Petroleum Act places a duty on the government to ensure that the extraction of oil and gas resources is undertaken for the benefit of current and future generations. This duty echoes the government’s constitutional obligation in articles 9(c) and 9(i) of the Tanzanian Constitution to utilize national resources for eradication of poverty, illiteracy and diseases. It is the government’s duty to ensure not only optimal exploitation of the resources, but also to ensure that it receives adequate economic benefits, through royalties, taxation and government participation, from their exploitation. Section 251(b) of the Act requires that the revenues obtained from oil and gas operations must be applied for the benefit of present and future generations. To achieve this objective, section 251(a) obliges the government to enhance transparency and accountability in the collection, allocation, expenditure and management of oil and gas revenues. 

Third, the Petroleum Act, in conjunction with the Oil and Gas Revenues Management Act 22 of 2015, establish mechanisms that promote government’s accountability in the management of oil and gas resources. The Petroleum Act requires that oil and gas agreements are not only granted through a transparent and competitive tendering process, but also are made accessible to the public. Similarly, in terms of s 18(4) of the Oil and Gas Revenues Management Act, all records of oil and gas revenues must be published in the government gazette. Furthermore, the discretionary powers of the Minister of Energy and Minerals to sign oil and gas agreements have been curtailed. Currently, all the oil and gas agreements are firstly negotiated by the Petroleum Upstream Regulatory Authority and approved by the cabinet before being signed by the Minister. Finally, to enhance prudent management of oil and gas revenues, section 251(b) of the Act establishes a special ‘Oil and Gas Fund’. In terms of section 21 of the Oil and Gas Revenues Management Act, it is a criminal offence to misappropriate the proceeds of the Fund or use the Fund’s information or documents for personal benefits.

Undoubtedly, the enactment of the Petroleum Act 2015 in Tanzania provides a beacon of hope in the effective management of oil and gas resources and avoiding the resource curse. However, the question regarding enforceability of the measures of accountability remain challenging. In conclusion, for Tanzania to benefit from its natural endowments and escape the resource curse syndrome, largely depends on “who will guard the guards”.

Written by Boniphace Luhende.