Oil In Kenya: A Blessing or a Curse?

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 11-Jun-2018

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 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 the exploration of this resource will lead to economic growth, consequently assisting in poverty eradication in the country. However, studies show that many 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 greed 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 rivaling groups. Conflict could 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.

ALSO READ: World Investment Report of 2018: Analyses of Africa’s Foreign Direct Investment (FDI)

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

Unless these negative indices are sorted out, Kenya will be another example of a country blessed with resource curse like Nigeria and Angola. But if the negative indices can be checked, it will translate to greater economic development for the country. I believe the president has a lot to do in this case by providing strong and corrupt free institutions for the country.

According to the 2018 World Investment ranking, the Kenyan economy witnessed a huge boost due to high investment in technology as the government provides tax incentives to encourage investors. As African countries are trying to move to a  technology based economy, in which Kenya is showing a good example, will this discovery of oil not distract the Kenyan government from other sectors of the Kenyan economy like what was experienced in Nigeria? Even if the discovery of oil in the land is a blessing, how prepared is the kenyan government to deal with the environmental issue that will arise from the exploration?

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