Natural resource revenues in Tanzania: Meeting citizen expectations and maximising impact for human development

The term resource curse, coined in the early 1990s, has been the focus of economic celebrities like Paul Collier, Jeffrey Sachs, and Daron Acemoglu, and has by now been fully embedded into the vocabulary of development economics.  The mismanagement of natural resources ranges from problems with contracts and transparency, to unsustainable rent seeking, to the deliberate use of resources to fund conflicts.

Tanzania is one of several African countries currently studying this history to avoid its repetition, having discovered a reservoir of 55 trillion cubic square meters of offshore gas.  Its gas endowment is second only to Mozambique in the region, now most recently joined by Egypt in the list of African states with promising energy endowments. Given the, especially recent, volatility of commodity prices, efficient resource revenue management has gained weight for policy makers and analysts, even when an endowment is appraised as commercially lucrative today.

New to the debate and the news headlines is how the average Tanzanian, rather than the detached economist, perceives the potential of her country’s natural resource endowment, and what should be done with it in the context of a severe national infrastructure gap; prolonged efforts to improve and develop human capital and social welfare; high operating costs for underdeveloped private markets; rising unemployment and disjointed supply chains; and grossly volatile global commodity markets.  Fortunately, a host of academic acronyms are now in high pursuit of these questions.

The Center for Global Development (CGD) and REPOA, with support from the International Growth Centre (IGC), the International Initiative for Impact Evaluation (3ie), the Bill and Melinda Gates Foundation (BMGF), and the International Development Research Center (IDRC) are leading work in Tanzania on public perceptions and expectations of natural gas revenue management.  On September 4, 2015, they hosted Natural Resource Revenues in Tanzania: Meeting Citizen Expectations and Maximizing Impact for Human Development to discuss the results of their polling and debate experiment.

Mark Henstridge (Oxford Policy Management) opened the workshop, presenting Delivering the Promise, an evaluation of prospects for Mozambique and Tanzania (gas), Uganda and Ghana (oil), and Liberia and Sierra Leone (iron) in linking resource revenues to human development.

Henstridge’s main message was that the impact of revenues will take decades to occur, but there is urgent preparation to be made now in establishing the necessary policy and regulatory frameworks as well as the appropriate enforcement mechanisms so as to avoid the risks of point source natural resources.  The timeline is determined by the requisite time for engineering, commercial appraisals, investment decisions; hydrocarbon sectors tend to require more time for these activities than other commodities.  Henstridge emphasised that for Tanzania, resource revenues will likely be materially significant, but not independently transformative.

According to the analysis, the immediate opportunity is not from the direct revenues from the gas sector, but from what job creation might be possible during the investment and construction phases of extraction.  The report foresees that most of the opportunities for direct employment generation will be during the investment phases, when investing companies will need land to be cleared and roads and other large-scale construction.  Strong construction skills will become an immediate priority in order to support Tanzanian job creation here.  The second job creation potential comes in orchestrating the incorporation of local firms into the gas industry supply chains.  This is an opportunity that demands training in and adherence to quality standards and strong firm capability.  Finally, Henstridge noted that there will be limited jobs created from actually operating any LNG facilities, which require only one to two hundred highly skilled people.

The second phase of the workshop was led by Mujobu Moyo (CGD), explaining the process and objectives of the project, Deliberative Democracy and Resource Rents in Tanzania, undertaken by the Center for Global Development (CGD) and REPOA.  To assess Tanzanian citizens’ views on natural resource management, this research has randomly sampled and polled 2000 individuals from 20 Tanzanian districts and gathered 400 of these individuals to a three-day workshop in Dar es Salaam to deliberate on LNG revenue management.  At this three-day event, citizen participants were encouraged to debate the policy questions and options as well as to question key policy makers and policy experts directly.  Theses polls were followed by discussions and polling of the county’s elites.  The overall objective of the work is to challenge the assumption that normal citizens with low literacy rates (a common problem in Tanzania) cannot contribute substantively to the debate on resource revenue management.

In summary, the results from the deliberative polling showed that giving information and increasing participant knowledge did not change preferences around savings versus spending resource revenue; increased the percentage that preferred the commercialisation of LNG; reduced the support for the direct distribution to households; and increased participants’ support for transparency.  Going forward, the researchers will look at the transcripts from the polling event’s group discussions and learn more about participants’ thought processes.

Figure 1: Summary of experimental treatment effects on Tanzanians’ knowledge and policy preference regarding natural gas


Note: Each cell shows the impact of information alone or information plus deliberation on the outcome listed in the top row.  The (+) denotes a significant positive effect, (-) a significant negative effect, and “X” no significant effect.
Source: Center for Global Development

The workshop concluded with a panel discussion with Prof. Samuel Wangwe (REPOA), Nancy Birdsall (CGD), Sunita Pitamber (AfDB), and Johnson Nyella (BOT).  Key points that emerged from the panel and workshop participants emphasised the importance of getting the balance between capital investment and social spending, engaging and informing citizens, and preparing the Tanzania’s economic capacity—in terms of skills and institutions—to link into natural gas supply chains.