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World Bank urges Africa to manage gas wealth

East African countries that have made major gas discoveries need to set up institutional frameworks to manage their new-found wealth effectively and use it to diversify their economies, a senior World Bank official said on Thursday.
The east African coastline is fast becoming a major energy hub with significant discoveries of gas and oil in Mozambique, Tanzania, Uganda and most recently Kenya.

The Washington-based development lender said Tanzania, east Africa's second-biggest economy, is expected to see an increase in revenue of up to $3 billion a year following major offshore gas discoveries in the country.

"The discoveries will have a massive impact. If I take the case of Tanzania, once the gas project is in place, we expect around $2-$3 billion of revenue a year," newly appointed World Bank vice president for Africa, Makhtar Diop, told Reuters in an interview.

"This is a lot of money and it will require early investment now in this window of four to five years to put institutional settings to be able to really manage very well those resources ... before the big investments come in the country."

British gas producer BG Group and explorer Ophir Energy said this month they had found more gas off the coast of Tanzania, raising hopes that the country will become a major new gas supplier.

Norwegian oil and gas firm Statoil also announced in February it has found natural gas offshore Tanzania.

Mozambique, the fastest-growing energy player in the region, estimates that energy firms will spend $50 billion over the next decade to develop its liquefied natural gas (LNG) industry.

Diop said there was a need for African countries to manage their expected revenues from gas and oil effectively and diversify their economies.


"It is a question that we are facing in a lot of African countries now that they have either discovered new resources or have been able to manage well the first phase of the commodity boom," he said.

"One of the priorities that we have in our work now is to really help build the capacity by learning from other continents the best experience that we have in terms of management of the resources," Diop said.

He said energy-rich African countries must ensure they do not become a one-sector economy.

"Africa has had a very good period of high growth ... the growth in Africa has been sustained at around 5 percent for the last five to six years and that was based on good management of macroeconomic fundamentals, but also a good management of the commodity boom," said Diop.

"So now I think the challenge is really to be able to diversify the economy and have a growth which is an inclusive and job-creating growth."

He also said Africa was now better prepared to deal with expected shocks of the euro zone crisis, but warned China's slowing economy was a concern for the continent.

"I think that what happened in 2008 and 2009 showed that most of the African economies were better prepared than they used to be in the past," he said.

"Not only in Europe, there is a general slowdown. China also has revised downward its growth prospects for 2012 and as you know China is an important driver of growth in Africa because of the commodity element."

31 May 2012

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