James Sanawe

James Sanawe

Manager of Oil Business

Tanzania Petroleum Development Corporation


SESSION: 16  Intricacies of Revenue Management in the Oil and Gas Sector - Way Forward

Many reasons exist why prudent management of revenues from the extractive sector and realization of benefits for all are of paramount significance, perhaps more than revenues from all other sectors. Hereunder are several of such reasons: the resources are diminishable. They deplete over time, cannot be recycled, hence incomes are a once for all phenomena; the resources are capable of generating quick revenues – with potential of being abused if not well managed; extractive industry related to peace . Due to big revenue generation, people cling to power in a bid to controlling the resource and revenues thereof vis-a-vis fair distribution of the benefits. Social unrest and political conflicts therefore result. Proper management of revenues and prudent control of the sector for realization of benefits for all cannot be over-emphasized; and oil and gas prices are very volatile.

History is replete with examples of oil and gas revenue mismanagement, leading to civil wars or causing most citizens to live in abject poverty while leaders and a few others who control the resource and revenues are leading luxurious lives . This phenomenon where the resources cause havoc in a society is called resource curse. Live examples of resource curse  in a bid to scrambling for resources are Sudan (where civil strife is quite common); Nigeria (where the largest population is living below the required minimum standard despite the size of revenues realized); Ecuador, Venezuela and Angola where the rulers have avariciously amassed wealth.  For example, in one of the African countries just in our backyards, a father has appointed his daughter (who by the way is the richest woman in Africa) to head the National Oil Company in the country.

As East Africa embarks on developing the oil and gas industry, strong institutions based on the rule of law, transparency and accountability will be required to manage the resource and revenues if we are to avoid the above shame. There is an urgent need to undertake resource mapping and planning in such a way that resources will not be harvested in quick successions and deprive the future generation of revenues. A portion of the revenues earned must be kept in a specially designated sovereign fund for future generation. There is need also to diversify activities and invest moneys gained from oil and gas in other ventures - real estate, banking, transportation, hospitality industry etc. such that the hydrocarbon revenues will continue generating income in future. In so doing our countries will avoid the Dutch Disease – where an economy depends on a single resource for its economic existence.

Revenues from oil and gas must be used to fund education, health, infrastructure and creation of secondary employment  through the investments enumerated above. Moreover, these benefits must be equitably distributed. Once a group of a few individuals or a class of people, tribe, religion, a denomination, clan or any subdivision of the society enjoys the revenues more than the rest, social unrest and conflicts will be an automatic outcome.