Not long ago, whenever I attended international oil and gas conferences sessions on East Africa filled the graveyard slot.
I would sit through almost empty presentations more out of courtesy than curiosity, while all the smart money went to the Gulf of Guinea. Not any more. East Africa is the new oil and gas frontier, and the sessions are packed.
The latest and perhaps most significant development for Kenya came this week when President Kibaki announced a significant find by Tullow Oil in the country’s north-western Turkana region.
Kenya has a strong agribusiness base, exporting tea, coffee, flowers and vegetables. It also enjoys a major tourism industry and Nairobi is a regional hub, providing financial and other services.
If significant oil reserves are found, this could be transformative for Kenya’s economy. It would also embolden the country’s ambitions to become a leading regional power.
This mood was summed up by a columnist in the Business Daily who wrote, “Kenya’s economic and diplomatic clout had largely suffered from lack of known natural resources that are of strategic importance to the rest of the world.”
Kenya’s politicians will need to keep a close eye on this bullishness, as regional co-operation within the East African Community rather than head-on competition makes better economic sense.
The country has already been positioning itself to develop regional oil facilities for exports of oil from Uganda and South Sudan. Work started in early March on building a huge deep-water port in Lamu, to service a pipeline across northern Kenya.
Avoiding oil curse
The West sees Kenya as a reliable regional anchor state, although its reputation as a stable democracy took a knocking with the surge of violence that followed the presidential election in 2008 and threatens to re-emerge.
A General Election is scheduled for late 2012 or 2013, and oil will raise anticipation of billions of dollars for the victorious.
The stakes have risen and the capacity of the country’s institutions to gracefully except defeat will be critical.
President Kibaki will not be running and has a golden opportunity to secure his legacy by ensuring credible and peaceful elections.
The greatest worry is that oil money might further blight an already corrupted political class. Kenya has a bad reputation of corruption, especially by its political class.
A former anti-corruption tsar, John Githongo, fled the country fearing for his life in 2005. He returned in 2008 and has set up Kenya Ni Yetu (Kenya is Ours), a campaign aimed at mobilising ordinary people to speak up against corruption, impunity, and injustice.
If Kenya is to effectively benefit from oil, and avoid the resource curse that many other oil producers have experienced, it needs to learn from the mistakes of others.
The lessons are clear: strengthen independent institutions and oversight; publish all taxes and royalties from oil; do not rush into prestige projects and extravagant consumption; and don’t neglect creating meaningful employment.
Kenyans need jobs, but the oil industry itself never employs enough.
The key is to use funds from the fuel to build up a competitive economy — Kenya’s opportunity is that it already has a successful base upon which to build.
Vines is the Chatham House Research Director of Area Studies and International Law, Head Africa Programme.
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