The oil tsunami (Part 1)

SALOM SHILONGO WRITES:

A tsunami is a long, high wave caused by an earthquake. Since a large oil deposit has been discovered off the shores of Namibia, the term “oil tsunami” is simply being used here as another term for the “oil curse”.

Namibia has discovered a large reserve of oil. And it seems everybody is very excited about the oil discovery. But I prefer to call it the “oil tsunami”, because I do not believe that the oil discoveries are going to solve our problems. Our problems are just too many.

It is true that the huge oil discovery could be a blessing to our economy and the country, but it could also be an atomic bomb if we are not prepared. There is an oil tsunami on the horizon, and I think it is going to cause havoc. So, we have to swim or sink. In the end, it is better to prepare than to fix a broken economy or country.

POSITIVE VS NEGATIVE

We are just talking about positive things from the oil discovery, but there are also negative things. And we need a serious discussion about the negative things because sometimes it is the negative things that matter most. At the end of the day, the negative things are going to wipe out the positive things. Anything is dangerous if it is too much. Even too much manure can choke the crops. And too much water can choke the plants.

If we take a look at some of the oil-producing countries in Africa, such as Angola, Nigeria, Gabon, Equatorial Guinea, the Republic of Congo and so on, they had much in common: a weak currency, a high level of poverty, a high level of unemployment, high inflation, a high level of inequality, as well as other socio-economic problems.

AFRICAN COUNTRIES

Some African countries have been producing oil for more than 40 years but they remain poor. For example, Angola has a population of 35 million people. It started to produce oil in 1955, but many Angolans are still living in abject poverty.

Nigeria has around 215 million people. It started to produce oil in 1958, but many Nigerians are still poor. Gabon has less than three million people. Oil was discovered in 1931, but many Gabonese are still poor. Equatorial Guinea has less than two million people. Oil was discovered in 1995, but today most of its citizens are still poor.

The Republic of Congo has six million people. Oil was discovered in 1957, but many Congolese are still living in abject poverty. But Botswana is a landlocked country of less than three million people. It doesn’t even have oil or the sea. But it is far better than many oil-producing countries in Africa. So, it is not really about how rich the country is; it is about leadership. Unfortunately, Namibian leaders don’t have a good track record with regards to the equal distribution of resources.

NAMIBIA

Oil discoveries in Namibia are estimated to bring in more than N$70 billion in revenue, which could trigger the worst inflation ever in Namibia. The inflation could wipe out people’s wages or income, pensions, savings, or investments. From housing to the basic commodities, prices are going to increase. Meaning that the consumers will end up buying less with their money.

The money from the oil revenue would boost the buying power. For example, if we use some of the money to create around 100 000 jobs or so, then the demand for housing is also going to increase.

And if we use some of the money to increase the salary of the public servants, then it would also increase the buying power. So, the prices of houses, rent, food, etc. will then also increase due to the high demand.

INFLATION

If inflation is high, then the government will be forced to raise the salary of the civil servants in order for them to keep up with inflation; otherwise, the civil servants would go on strike. So most of the money from the oil revenue or green hydrogen would end up going towards the government wage bill.

For example, because of the green hydrogen, oil and gas projects, the demand for housing at Lüderitz and Oranjemund has increased. According to The Namibian newspaper of 28 August 2023, due to the high demand for housing, a house valued at N$350 000 at Lüderitz has been sold for N$1.4 million. While at Oranjemund, a house valued at N$400 000 has been sold for N$1.4 million.

Remember that there are also expatriates that are going to work in the oil industry, and they will need housing. Oil could multiply our problems, as many people will not be able to afford basic necessities or pay their housing loans or bonds because of inflation or high living costs.

The oil discovery is not a silver bullet to our problems. Anyone who believes that oil is going to solve our problems is either a politician or a madman, – To be continued

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