26 Nov 2013 | Tony Leon | Original Publication: BDlive
There are few, if any,
developing democracies, which rely on oil and gas for the bulk of their
exports, that have been certified as ‘free democracies’, writes Tony Leon
UNTIL fairly recently, residents of high-end Malibu in California and
Clifton in Cape Town had something in common, in addition to occupying some of
the most expensive property in their countries: both these beach-facing bolt
holes for the super-rich provided grand shelters for Teodoro Nguema Obiang
Mangue, son and heir apparent of Teodoro Obiang Nguema Mbasogo, who has ruled
Equatorial Guinea since 1979.
The Malibu estate, priced at about $30m, was on a lavish scale in
comparison to the Clifton "bungalow", which was purchased for R23.5m
in 2004. The Californian dwelling comprised a 6.5ha property, with a palm-lined
driveway leading to a mansion surrounded by swimming pools, tennis court and a
four-hole golf course. Its garage housed more than two dozen cars including a
$2m Ferrari and eight other Ferraris.
Obiang’s international property empire has another common provenance,
well described by Larry Diamond, director of the Centre on Democracy
Development and the Rule of Law at Stanford University: "What made these
extravagant possessions all the more remarkable was that they belonged to a
government worker from a small African country who was making an official
salary of about $80,000 a year."
This was in October 2011, when the US department of justice obtained a
court order to seize the Malibu property on the grounds that Obiang’s property
riches were the result of corrupt practices such as "personal taxes"
he levied against timber companies operating in his country, to wit a $28.80
tax for every log exported when he was minister of forestry. Earlier last year,
French authorities seized his Parisian mansion worth about €100m.
Although his estates in California and France have diminished, his political
career back home has flourished — he is now Equatorial Guinea’s second
vice-president.
South Africa’s government lacks either the instruments or the appetite
to attach Obiang’s local assets. Thus the residents of Clifton are, via the
"Bungalow Owners Association", using municipal bylaws to have the
rat-infested property declared "derelict".
Aside from providing a potential episode of Lifestyles of the Rich and
Famous, the Obiang family provides a poster for the so-called resource curse,
as even more than its abundant forests, the country is one of the most oil-rich
in the world, having exported 400,000 barrels of oil a day for the past 18
years. Diamond and Jack Mosbacher, in a recently co-authored article in the
journal Foreign Affairs, point to the cruel paradox of this bonanza. "The
country is wealthier, in terms of GDP per capita, than France, Japan and the
UK. Little of this wealth, however, has helped the vast majority of Equatorial
Guinea’s 700,000 people: today three out of four Equatorial Guineans live on
less than $2 a day, and infant mortality rates have barely budged since oil was
first discovered there."
Depressingly, the authors make a wider point: although, in general,
Africa has made impressive strides in improving governance over the past 20
years, according to the World Bank, the continent’s oil exporters rank in the
bottom quintile globally in their ability to control corruption, formulate and
implement effective policies, regulate private sector development and enforce
the rule of law. And there are few, if any, developing democracies anywhere,
which rely on oil and gas for the bulk of their exports, that have been
certified as "free democracies". South Africa, for which minerals are
its export mainstay, is something of a democratic outlier here, but oil and gas
seem more problematic.
The economic distortions the "resource curse" inflicts on
countries — from inflated exchange rates, to undermining manufacturing
competitiveness — are well known.
Less explored but now of some moment in view of the slew of East and
West African countries soon to emerge as new players on the oil and gas scene
is the democratic deficit it creates. Oil revenues, in simple terms, are
"rents", or unearned income in the hands of governing elites. Taxes,
in contrast, from citizen to government create a democratic and accountable
bond between government and people. The sale of natural resources "reduces
government’s reliance on revenue from its people and thus weakens the incentive
to serve them". When resource rents replace taxation as the primary
revenue generator for the state, this incentivises the political elite to focus
on the "private accumulation of wealth" and not on delivering public
goods, such as roads and schools. Hence Malibu mansions and high infant mortality
both come from the same source.
The key is to ensure that the people themselves receive the direct
benefit of the resource revenue stream, as cash transfers into bank accounts
and the government then taxes back a portion of it. This ingenuous scheme is
elaborated by the authors. It’s a lot more "transformative", even
revolutionary, than the recycling of stale ideas that often informs the debate
on empowerment.
Leon
is the author of The Accidental Ambassador (Pan Macmillan). Follow him on
Twitter: @TonyLeonSA OR on Facebook: facebook.com/TonyLeonSA
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