Tanzania must properly utilise resource wealth

June 15, 2013 12:20 pm0 comments by:

13226710501—Tanzania is sitting on a verified mountain of natural gas resources, enough to help pull the country into economic prominence on the continent. As new discoveries continue to be made and exploration speculators flood to bid for a first crack at tapping this new hotbed for natural gas, the question of how Tanzania will channel this wealth into real progress for all citizens remains to be seen. The gas reserves are large enough to catapult the country into global relevance—especially since the discovery of huge reserves off the East African seaboard—some are predicting that the region will become the third largest natural gas exporter in the world.

Natural gas extraction began in the early 21st century, but since that time the industry and the reserve value has boomed with 43 trillion cubic feet confirmed as of 2012, which translates to a total value of US$ of 430 billion, a major economic boost for a country that has leaned heavily on its agriculture industry for many decades.

As with many nations that suddenly find themselves in position to amass extensive wealth, Tanzania faces some daunting challenges in avoiding the “resource curse” that has plagued many of its neighbours, most notably the Democratic Republic of Congo (DRC), which holds massive mineral resources, but conflict, corruption and mismanagement over the years has prevented the country from capitalising on its potential.

Already violence and protests have erupted as divisions within the country have emerged. A rift has existed between the Mtwara region—where the majority of reserves are found—and the rest of the country. The disconnect between this region and the rest of Tanzania may partially stem from the fact that the main thoroughfare between Mtwara and Dar es Salaam remains unfinished, despite promises of completion dating back to the country’s independence. This evokes contention that the region has been ostracised by the central government over the years. Recent violence over a proposed construction of a pipeline through Mtwara led to seven deaths. The people of Mtwara have claimed that the budget for this extensive project has provided little insight as to how this project will help their community. The proposal will move the gas out of the region for processing and leave behind only approximately 0.3 percent of revenues for the locals. Despite the claims by President Jakaya Kikwete—who stated that the natural resources are for the benefit of all Tanzanians during a 21 May 2013 television appearance—the details of the deal seem to tell a different tale altogether.

Couple this with the fact that the discovery of offshore reserves has the potential to fuel separatist movements from the island of Zanzibar, given its close proximity to the reserves and its status as a semi-autonomous island. Zanzibar has already considered forming its own oil company to capture some of the revenue that is driven by such discoveries.

Furthermore, the discovery of oil in border lakes surrounding the country have further fuelled contention. The race for these oil reserves have cooled relations between Tanzania and Malawi over drilling activities in Lake Nyasa, which borders both countries and between Tanzania and the DRC over oil finds in Lake Tanganyika.  These disputes could lead to destabilisation in the region between nations, as each vies for control over the large profits that natural resources can yield. Needless to say, Tanzania must proceed with caution on all fronts to avoid any confrontation both internally and externally. Nothing can curb resource aspirations quicker than conflict.

However, Tanzania holds a golden ticket if they can manoeuvre through the politics and posturing that engulfs any such discovery of this magnitude. They have already taken a necessary step towards ensuring that national benefit will come from all of this potential wealth by insisting that all companies participating in the natural gas value chain become listed on the Dar es Salaam Stock Exchange.  And the opportunity for profit does not only lie in the exportation of natural gas.

Already Tanzania has pegged Mtwara as one of two regions that will be capable of liquefying natural gas. Also, the potential for a huge boost to the fertiliser industry remains, as Norwegian fertiliser company Yara-International has unveiled plans to open a plant in the region that will supply fertiliser throughout the continent. Natural gas is a key ingredient in fertiliser production. Inevitably, major profits will be fruited by the government through the deals that they negotiate, but will the whole of the country benefit?

While these discoveries and agreements signal a big boost to the agro-based economy, the government must ensure that these benefits are seen throughout the country. While Tanzania remains one of the more peaceful countries in the region, it still lags way behind much of the world in standard economic factors. It is categorized in the low human development section of the United Nations Human Development Index and 201st in per capita income globally. These recent discoveries are nothing short of prime opportunity for Tanzania to spread the wealth and join the ranks of the more economically developed countries on the continent such as South Africa and Nigeria. Ultimately the next few years will decide the future for Tanzania and its people, hopefully wise investment for the common good will win out, but for now, only time will tell.


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