Salom Shilongo
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. 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.
The huge oil discovery could indeed be a blessing to our economy/country, but it could be an atomic bomb to our economy/country if we are not
prepared.
There is an oil tsunami on the
horizon, and I think it is going to cause havoc.
So, we must swim or sink.
In the end, it is better to prepare
than to fix a broken economy/
country.
We are just talking about positive things from the oil discovery, but there are also negative things about the oil discovery. 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. Too much water can choke the plants.
If we 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, high level of poverty, high level of unemployment, high inflation, high level of inequality as well as other socio-economic problems.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 producing oil in 1955, but many Angolans are still living in abject poverty.
Nigeria has around 215 million people. It started producing oil in 1958, but many Nigerians are still living in abject poverty.
Gabon has less than three million people. Oil was discovered in 1931, but many Gabonese are still living in
poverty.
Equatorial Guinea has less than two million people. Oil was discovered in 1995 – but today, most of its citizens
are still living in poverty.
The Republic of Congo has six
million people. Oil was discovered in 1957, but many Congolese are still
living in abject poverty.
However, Botswana is a landlocked country of less than three million ]people. t does not even have oil or a sea, but it is far better than many
oil-producing countries in Africa. So, it is not about how rich the country is.
It is about leadership.
Unfortunately, Namibian leaders
do not have a good track record about the equal distribution of resources.
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.
Inflation could wipe out people’s wages/income, pensions, savings or investments. From housing to basic commodities, prices are going to increase. This means 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.
If we use some of the money to increase public servants’ salaries, it would also increase the buying power.
So, the prices of houses, rent, food, etc, will then also increase due to the high demand. If inflation is high, then the government will be forced to raise the salary of civil servants for them to keep up with inflation. Otherwise, the civil servants would go on strike.
So, most of the money from the
oil revenue/green hydrogen would end up going towards the government wage bill.
For example, because of the green hydrogen as well as oil and gas projects, the demand for housing at Lüderitz
and Oranjemund has increased.
The Namibian newspaper last
year reported that due to the high demand for housing, a house valued at N$350 000 at Lüderitz has been sold
for N$1.4 million.
At Oranjemund, a house valued at N$400 000 has been sold for N$1.4 million.
Remember that there are also expatriates who 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 necessities or pay their housing loans/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.
We are being told that the oil discovery is going to double our economy. However, if the economy is big, then the service provision must also match the size of the economy.
The demand must match the supply. The money in the country must match service provision. If there is more money circulating in the community, but there is a supply shortage, then it will trigger inflation.
If it is true that oil is going to double our economy, then we must be prepared for power blackouts as well.
A big economy would need a lot of power or electricity. I hope the green hydrogen or renewable energy will save us from power blackouts.
The oil tsunami could trigger economic chaos, or the worst e
conomic crisis in Namibia since independence. It could also weaken our currency, so it might just become another kwanza. We must also avoid reckless borrowing in anticipation of oil revenue. I propose that we must
rather use oil to borrow oil.
This means that we have to borrow some oil from the oil-producing countries, and give back their oil once we start with oil production. There are
many advantages to borrowing oi
l instead of money. For example, we
will be able to sell the borrowed oil at an affordable price, which could
reduce the living cost and boost the economy. It is cheaper and safer to borrowoil than to borrow money. For example, if we borrow US$1 billion, then we must pay it back with interest. If our currency becomes weaker than the American currency, then we will
end up paying more.
However, if we borrow ten billion barrels of oil, then we will pay back only the agreed amount of oil.
We need to remember that the days of the oil bonanza are over. So, we cannot bank on oil. The future of the oil market is uncertain. Oil is facing tough competition from electric cars as well as green/renewable energy. I am afraid
that oil is going to become very cheap soon.
If the price of oil remains high, then many people will go for electric cars and renewable energy. So, oil is probably going to become cheaper than ‘otombo’ soon. We must also remember that oil prices are unpredictable.
Sometimes it is good, but it can also be bad. Then we are being told that the oil discovery is going to double our economy by 2043.
If you look at our gross domestic product at independence, and compare it to where it is today, you will see that it has increased significantly.
How many people are suffering in Namibia today? So, just because the economy will double by 2043, it does not necessarily mean that life will improve for the masses.
By 2043, the population, unemployment, inflation and living costs would also increase. Thousands
of school-leavers are joining the job market every year – remember.
In 1990, had someone predicted
that the economy would more than double by 2023, people would have been over the moon, thinking that by 2023, Namibia would be a paradise. What now? Another thing is the currency depreciation, which means that the
value of N$1 billion/million dollars
today will not be the same in 2043. Today, N$70 billion might look like a lot of money – but in 2043, it would be worth very little due to the living cost as well as the high population.
This is just like the value of N$1 billion/million dollars in 1990 is not
the same today. In 1990, one could
build more than 50 houses with
N$1 million in Windhoek. At independence, a person earning less than N$2 000 was able to buy a
house in Windhoek. Remember that in the first 15 years after independence, the national budget was much smaller.
However, we did more with less. Now, our national budget is much bigger, but there is little development taking place, and more people are suffering.
So, just because the budget is going to increase because of the oil revenue.
It does not necessarily mean that the masses are going to benefit.
High public debt could also dent the oil revenue. Even if one is earning a
lot of money, if you owe other people a lot of it, it will not make a difference because you must still settle your debt.
So, some of the money from oil revenue would be used to settle our public debt. In the end, there would be little money left for development or to
provide services to the people.
We must also remember that the oil industry does not create enough direct employment.
Be prepared for the oil tsunami.
*Salom Shilongo writes in his
capacity as a citizen.