Is Uganda Capable of Defeating the Resource Curse?

Political and economic dysfunction known as “resource curse” has triggered odd responses among countries that have discovered oil recently. The economic suffering of countries in rich in natural resources contradicts the basic laws of economics that would predict that the more natural resources the country has, the more the economic advantages and opportunities. The literature for example is beset by illustrations of how oil-rich Nigeria has misused a quarter trillion dollars of oil revenues and country is deeply indebted.  Venezuela, which was the richest country in the world in oil deposits, is struggling economically with two thirds of the population in living in poverty.  Indeed, the current Venezuela crisis and stories of how the country with the world’s largest oil reserves cannot afford to feed its people are reminiscent of the economic and political challenges that have befallen a host of oil rich countries. Therefore, the possibility of a resource curse overshadows the optimistic view that would surround any oil or mineral discovery. 

However, researchers have recently come to believe that the resource curse is no longer a possible threat given that there are many measures capable of overcoming it arising from past experiences. The researchers make reference to countries like Norway and Bostwana, among others who have managed their oil very well for the benefit of their population. Whereas this optimistic view has its merits, the prevalence and spontaneous incidences of the initial conditions in Uganda that resemble those of the countries that have mismanaged oil in Africa is worrying. Any average upright Ugandan, who follows the current economic and political trends, will agree with me that the current political and economic landscape raises many concerns. Like Kehlog Albran once quoted, “I have seen the future and it is very much like the present, only longer”, the current state of affairs and conditions before oil production starts raises questions about whether the country will be capable of avoiding the resource curse. The points of contention relate to the prevailing political challenges related to declining democracy, the weak political institutions, corruption permissiveness, high levels of unemployment, inequalities and poverty, and the people’s huge expectations about oil. 

It should be noted that available evidence across the many oil rich countries shows that the most fundamental problems that have led to the resource curse are politically oriented. The claim that oil-impedes-democracy is both valid and statistically robust in the empirical literature. The windfall oil revenue in most developing countries becomes a disincentive to the political leadership to share power; and the availability of oil revenue offers the leaders leverage to buy political legitimacy and repress opposition.  Democracy and the rule of law diminish to almost zero and the control over natural resource wealth replaces reason, justice and fairness. The resources that were seen as a nation’s endowment become exclusive to the current government and the people close to it.  This fuels resentment, resistance and conflicts by those excluded resulting into civil obedience, protests and wars as has been the case in Nigeria, Venezuela and Democratic Republic of Congo.  Therefore, in a country where the current regime has been in power for over three decades; and with significant traces of declining democratic space, rule of law and repression of opposition, one has to fear what will happen when oil windfalls start dropping.  I have fear that the current political regime will not be able to manage the temptations that come with oil windfalls. The bitter truth is that oil revenues will destabilize the remaining nascent democratic institutions and amplification of autocratic ones.  Remember, it is not only oil and gas revenue we are taking about, the prospects of other mineral rents/revenue is huge.  

The institutions that should provide the oversight and management of oil revenues and minerals in general have many inherent problems. It is frustrating to hear that Uganda has the best policies in place but the problem is implementation.  As the President of Equatorial Guinea Teodoro Obiang Mbasogo said while addressing the Oil and Gas Convention and Regional Logistics Expo 2017 in Uganda should cause worry about oil revenues management. He cautioned Ugandans that “Oil is like honey, it attracts both well-meaning bees and evil ones”. Therefore, one wonders how the institutions tasked with managing oil will be run in a country where most of the bees are not well-meaning. The greediness of Ugandans about oil revenue has been already demonstrated by investigations into the famous presidential hand shake. The investigations revealed that even celebrated “holy and trusted leaders”-the well-meaning bees change into evil bees in the face of oil money. Therefore, in a country where the “evil bees” outnumber the good ones, there is high probability that people who will be entrusted with managing our oil revenues do not have Ugandan interests at heart.

Nonetheless, the pre-oil socio-economic conditions that have influenced the oil problems in other countries are apparent in Uganda. For example, before oil production in Venezuela in the 1970s, high unemployment, income inequality and poor public services characterized Venezuela’s economy. Despite the favorable oil prices at the time, it became extremely difficult for Venezuela government to use the oil revenue to solve its socio-economic problems. In Uganda, the gap between the rich and poor is widening, unemployment is skyrocketing and public service delivery is poor and inadequate.  Where the majority of the population is poor, inadequate jobs, no stable incomes and poor social services, there is widespread dependency on the government as source of hope. It is not surprising that Ugandans have huge expectations about oil. The question therefore is; how will the current government manage these expectations bearing mind the declining oil prices and the socio-economic inequalities of income, poverty, ethnic tensions, and unemployment?

In conclusion, the resource curse is a conditional one and therefore the battle to avoid it is not an easy one if the prevailing political, socio-economic conditions are favourable. This is the situation Uganda finds itself in before oil production and mineral exploitation.   Just knowing that the problem existed in other countries and borrowing a few benchmarks it is not enough to avoid the curse. Already, the 2017 Resource Governance Index released in June shows that Uganda is among countries that are struggling to adequately govern their oil, gas and mining sectors. Therefore, country  need to conduct a thorough diagnosis of the mineral sector, dissecting current pre-oil conditions in their totality and avoid the mistakes others did in managing mineral revenues.  The starting point should be to start regarding our natural resources as national endowment. This definitely will facilitate deeper scrutiny of other oil rich countries, both those who failed and those that have survived the resource curse.