Black gold: Boon, boom or bust?
By Helena Mboti
Economist, FNB Namibia.
Namibia’s oil discoveries have been a source of optimism for the future trajectory of the economy. Yet with great excitement comes caution, as other countries’ experience internationally, provides stark lessons on the double-edged sword of oil riches. Namibia stands at a crossroads, with a choice between leveraging the potential windfalls of sustainability or succumbing to the pitfalls that have crippled other resource-rich nations.
Qatar’s Transformation: A Beacon of Hope?
Qatar offers a shining example of a successful oil-fueled transformation. The country leveraged oil revenues to implement an ambitious development plan characterized by substantial infrastructure investments spanning world-class airports, seaports, and high-speed highways. Education received a major boost, with universities such as Education City attracting leading academics and transforming Qatar into a knowledge hub.
Similarly, healthcare underwent a remarkable overhaul, with modern hospitals and facilities offering advanced medical care to its citizens. The result is a staggering increase in GDP per capita from US$27 151 in 2002 to US$ 87 662 in 2022 according to the World Bank Qatar now ranks as a high-income nation.
Angola’s Missteps: A Cautionary Tale
The path paved with petrodollars can be treacherous, as Angola’s story tragically illustrates. The Angolan experience teaches us that the absence of prudent management leads to a cascade of problems including rampant mismanagement of funds, widening inequality, and rising inflation levels hurting lower-income households the most. The rapid influx of oil revenue fuelled inflation can erode the purchasing power of ordinary citizens if not managed effectively. Crucially, the hyper-focus on the oil sector and neglect of the nonoil economy in the country stifled diversification and left the country susceptible to oil price shocks. Angola’s experience serves as a sobering reminder that oil wealth if mismanaged, can become a curse rather than a blessing.
Navigating the Narrow Path: International Lesson for Namibia
Namibia can take valuable lessons from both Qatar’s successes and Angola’s failures. To avoid the pitfalls of the resource curse, and to ensure long-term sustainability and intergenerational equity, oil resources must be well managed.
Encouragingly, Namibia has already launched the Welwitschia Fund similar to Norway’s Sovereign Wealth Fund, intended to ensure increased intergenerational equity opportunity, an important first step that should be applauded.
Botswana’s diamond wealth management, interestingly, is characterized by citizen-owned enterprises in the oil sector, thereby ensuring a direct stake in the nation’s prosperity. Channelling these well-managed revenues towards correctly diversifying the non-oil economy to the benefit of all Namibians, will be paramount.
This requires robust governance through independent oversight mechanisms, supporting a vibrant civil society, and promoting transparency in resource management. Indonesia’s Resources Governance Index, which promotes transparency and accountability in the extractive industries, is a useful blueprint in this regard.
Without reforming the education system, Namibians cannot fully participate in the sector, and broad-based benefits will be limited. The government’s drive to implement a local content policy is commendable, but futile without Namibians capable of servicing the industry at international standards. Investing in human capital will ensure the local content policy’s objectives are achieved. Strengthening technical and vocational training programs and fostering innovation and entrepreneurship in the years before oil production is critical in this regard.
This is where preparation becomes paramount. The exploration stage of the oil production timeline should be viewed as a training ground for all sectors of society. The public and private sectors must hone the skills required for the specialized needs of the oil and gas sector spanning engineering, geology, and finance amongst others.
Aspiring entrepreneurs should explore niches in the oil services sector, from catering to logistics to creating oil rig uniforms and pioneering innovative technologies. Civil society organisations must unapologetically hold leaders accountable, ensuring transparency and equitable distribution of benefits.
This is not a call for passivity but for proactive adaptation. Namibia can learn from Qatar’s vision and avoid Angola’s pitfalls, but transforming its oil discovery into a catalyst for inclusive and sustainable development.
By investing in people, leveraging knowledge, and fostering a culture of accountability, there is hope that Namibia can transform this black gold into a catalyst for inclusive and sustainable development, paving the way for a brighter, more equitable future.
