Oil, family ties and corruption


Karweaye highlights a worrying trend

Karweaye highlights a worrying trend

Since 1990 the petroleum industry has invested more than $20 billion in exploration and production activity in Africa. A further $50 billion will be spent between now and the end of the decade, the largest investment in the continent’s history. But most Africans in these countries where oil are being produced are seeing little benefit from this influx of oil drillers and investment. In fact, because of an economic paradox known as the Resource Curse, they are often hurt by exports of their countries’ oil. Between 1970 and 1993, countries without oil saw their economies grow four times faster than those of countries with oil. Oil exports inflate the value of a country’s currency, making its other exports uncompetitive.

At the same time, workers flock to booming petroleum businesses, which saps other sectors of the economy. Oil decimates a country’s agriculture and traditional industries. Experience in Africa with discoveries or explorations of oil can be very dangerous for national economies, technical, social and infrastructural development. Consider Gabon, which produces about 300,000 barrels of oil a day. It’s covered with tropical rainforest, but it’s hard to find bananas that are grown there. They are mostly imported from Cameroon. At one point, Gabon was the world’s largest per-capita importer of champagne. The oil — and the champagne — will eventually run dry. Gabon, with relatively small reserves, is already coming to terms with that possibility. By then, much of the rest of the country’s economy may have atrophied. Economists also call this phenomenon the Dutch Disease because it was observed in the Netherlands after natural gas was discovered in the 1960s in that country’s portion of the North Sea. The Dutch manufacturing sector withered as the gas industry grew.

In addition, oil money tends to corrupt politicians. They end up vying to pocket a share of the finite petroleum riches, rather than looking for ways to invest in their country’s long-term prosperity. Oil producing African’s governments aren’t dependent on income taxes and therefore don’t have to do what the citizens want. The state isn’t an engineer of economic growth, but a gravy train. None of the money gets down to the people. A 2007 French police investigation found three Presidents from Africa in the person of the late Omar Bongo of Gabon, Denis Sassou-Nguesso of Republic of Congo and Teodoro Obiang Nguema of Equatorial Guinea and their relatives owned homes in up market areas of Paris and on the Riviera along with luxury cars, including Bugatti’s, Ferraris and Maserati’s. The French arm of anti-corruption group, Transparency International corroborated the evidences against those three leaders. Gabon, Republic of Congo and Equatorial Guinea are all oil producing African countries.

Equatorial Guinea is a family business masquerading as a country. It’s one of the most closed societies on earth. The sizzling oil sector is enriching a clique of politically connected people and creating boomtowns catering to the industry but seldom providing much wider economic benefit or even employing many local people. It’s a capital-intensive industry, not a labor-intensive one. So they don’t need to hire a lot of people, and the ones they do hire are petroleum engineers. You have local people hired to be security guards, but that’s about it.  President Teodoro Obiang Nguema has ruled since overthrowing his uncle in a coup in 1979.  Yet the discovery of oil several years ago has meant huge wealth and massive investment flowing into this poor country of about 670,000 people. Not much of this has trickled down to ordinary people.  His government is regularly accused of brutality and rights abuses – it holds political prisoners and allegations of torture are rife. The son of Equatorial Guinea’s President, Teodoro Nguema Obiang Mangue has been put under formal investigation in France for money laundering this year. In September of last year, the French police seized 11 luxury cars belonging to Mr. Obiang’s son, including two Bugatti Veyrons, among the most powerful and expensive cars in the world; a Maybach; an Aston Martin; a Ferrari Enzo; a Ferrari 599 GTO; a Rolls-Royce Phantom; and a Maserati MC12. In 2003, Global witness investigation exposed how the President’s son and 2nd Vice President, Teodorin Obiang, has spent millions of dollars on sustaining a playboy lifestyle in Europe and the U.S. while reportedly earning a government salary of only a few thousand dollars a month. A number of banks, including Wachovia, Bank of America and UBS, allowed Teodorin to funnel over $100 million into the U.S. in a space of two years, which he used to buy a $35 million Malibu mansion and a $33 million private jet. In 2011, U.S Justice Department seized assets worth $70m, including Gulfstream jet, Malibu mansion, Ferrari and Michael Jackson memorabilia fromthe son of Equatorial Guinea.

The flow of oil riches can create bizarre contrasts. Luanda, the capital of Angola and also the center of its oil industry, is just one example. Luxury high-rises are being built there despite the country’s extreme poverty, and oil companies are paying $15,000 a month to rent apartments for their employees. For expatriates, it’s one of the most expensive cities in the world. The disparity between rich and poor there is like nowhere else in the world. Oil companies such as Cabinda Gulf Oil Company Limited, Chevron’s wholly owned operating unit in Angola, is a major presence in Angola’s energy market. In fact, Cabinda is one of Angola’s top petroleum producers and the largest foreign oil-industry employer and other are flocking to the country because its reserves lie offshore as in the case of Liberia, allowing for safer drilling than in the Niger Delta. Today, Isabel dos Santos, oldest daughter of Angola’s longtime president, Jose Eduardo dos Santos, is Africa’s richest woman. Her net worth is estimated at 3.7 Billion while ordinary citizens live on less than $2.00 a day.  According to Forbes, Isabel dos Santos has quickly and systematically garnered significant stakes in Angola’s strategic industries–Oil, banking, cement, diamonds and telecom–making her the most influential business person in her homeland. For President Dos Santos it’s a foolproof way to extract money from his country, while keeping a putative arm’s-length distance away. If the 72-year-old Angolan President gets overthrown, he can reclaim the assets from his daughter. If he dies in power, she keeps the loot in the family.

Nigeria with oil wealth is vast — it has the world’s 10th largest reserves — so are its problems. It’s both an enormous country, with about 135 million people, and an ethnically diverse one, with hundreds of distinct ethnic groups. And its reserves lie in the poor, rural Niger Delta.  People in the Niger Delta live almost as if it’s the Stone Age. They live in stick huts on little islands in the mangrove swamps. Many of the villages are accessible only by boat. Nearby, multibillion oil facilities, with executives being dropped in by helicopter. Little of the oil wealth gets invested back into the delta and few of the companies in the Niger Delta employ local people. That has contributed to civil unrest and lawlessness in Niger Delta.  Thousands of people are killed in small-scale guerrilla warfare in the delta every year. Boys drill holes in the pipelines at night and suck out the oil: 100,000 to 200,000 barrels a day were disappearing like this at one point. The money is siphoned off to arm the guerrilla groups. In March of 2014, the United States government froze more than $458 million that former Nigeria Dictator leader Sani Abacha and his family obtained through corruption from the oil industry and hid in bank accounts around the world. About $313 million was restrained in bank accounts in the Bailiwick of Jersey and $145 million was restrained in bank accounts in France, the US justice department said in a statement. The department said it was pursuing additional holdings in the United Kingdom with an expected value of at least $100 million. The Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi was suspended and later sacked after he accused the state oil company, Nigerian National Petroleum Company (NNPC), of failing to account for $20bn in oil revenues. Jonathan immediately sent to parliament the name of another banker he proposed as the new custodian of the nation’s federal reserves, making clear that he has effectively fired Lamido Sanusi, a 52-year-old career banker who has spearheaded bank reforms and making powerful enemies among vested interests in a country where corruption is endemic.

In the case of Liberia, the President appointed her son Robert Alvin Sirleaf, as member of the board of the National Oil Company of Liberia (NOCAL) and subsequently appointed him as Chairman of the Board of NOCAL after meeting Executives of Chevron Corporation behind close door without the presence of NOCAL’s officials. As Chairman of NOCAL Board, Robert Sirleaf presided over lucrative blocks 13 and 14 through controversial concession arrangements which the General Auditing Commission indicated were marred by flaws and irregularities and confirmed in the Moore Stephens draft audit report. In 2011, watchdog organization Global Witness reported that both Oranto and NOCAL made payments in excess of $120,000 to members of the Liberian legislature in order to facilitate approval of oil contracts.

Chevron holds a 70% stake in the nascent exploration venture, Oronto 20% and NOCAL 10%. Mr. Clemenceau Urey, former Chairman of the board of NOCAL corroborated Global Witness report. Appearing before the National legislature, Urey admitted giving bribes to the 52nd National Legislatures for the ratification of past concession contracts. In the case of the Chevron Corporation acquisition, President Sirleaf said in 2010 and I quote “I met also with the people of Chevron Oil Corporation because we have been encouraging them to come and do business. We think a big US Oil Company like Chevron coming into Liberia will send a big signal. Though, they had meeting with me to conclude and we are working with the National Oil Company of Liberia (NOCAL) to see how they can conclude for Chevron to come.” President Sirleaf statement is a clear indication that Chevron coming to Liberia is the product of one her numerous trips to the USA. Bid or no bid, Chevron was the only significant company to take charge of Liberia’s oil exploration because “it will send a big signal.”

Chevron in return provided US$10.5 million in social development to the people of Liberia. President Sirleaf told Chevron the 10.5 million shouldn’t be place in government coffer but through presented to Non-governmental organization (NGO) which happened to be Robert Sirleaf’s so-called foundation called Robert A. Sirleaf Foundation. According to Liberia of Public Integrity (LIPI), “Global Witness reported that it has not been able to obtain documentation on how the $10.5 million was expended and for which purpose. LIPI lamented “It is sad that the President of Liberia will inform Chevron not to give the social contribution to the Ministry of Finance, clearly demonstrating that she lacks complete confidence in the nation’s treasurer of the public accounts.”

President Sirleaf appointment of her son as Senior Advisor and Chairman of the board of NOCAL violated her own Executive Order 38  on the Code of Conduct for all members of the Executive as well as Article 90 (a) and 90 (b) of the 1986 Constitution prescribed standards of conduct of public officials. Article 90 (a) states, “no person whether elected or appointed to any public office, shall engage in any other activity which shall be against public policy, or constitute conflict of interest.” Robert A. Sirleaf ran the so-called Robert A Sirleaf Foundation and uses his position to allocate funds provided by business and foreign governments conducting business with Liberia.

Less than a year after his resignation from Government, as Chairman of the Board of the National Oil Company of Liberia (NOCAL) and Senior Advisor to the President, Mr. Robert Sirleaf, son of President Ellen Johnson Sirleaf, is alleged to have received US$2M from the Algerian Government for security operations. It could be recalled that on December 8, 2012, the management of the Liberia Petroleum Refinery Company (LPRC) announced that it had entered into discussions with the Kuwait Petroleum Company (KPC) for the supply of petroleum products at concessionary price. The management of LPRC, in a press release issued in Monrovia at the time, disclosed that these discussions were the result of a request made by President Ellen Johnson-Sirleaf during her visit to Kuwait. Mr. Robert Sirleaf was appointed by his Mom as special envoy of the President to Kuwait to lead negotiations with the Kuwaiti government for cheap petroleum products for Liberia.

To solidify their stance on the emerging oil and gas sector and the draft Petroleum Bill, the First Family along with NOCAL officials presented bogus experts during the Cabinet and the National Legislature week-long Round-table Consultation on the Draft Petroleum Law of 2013. Estrada Bernard, III, the 17   years grandson of Jenny Bernard, the elder sister of President Sirleaf was given the platform to lecture Liberians oil and gas. In defense of their decision inviting a teenager of the first family to make a presentation on a critical sector in which he (Bernard) has no experience, Jacqueline Khoury, Director of the NOCAL Board responded; “We didn’t want to grab a kid in Liberia and have to school him on making a presentation.” She noted that the President’s grandnephew has made over 200 presentations across the U.S, but failed to indicate whether those presentations were in any way connected to oil and gas, and their implications for Africa.

Nearly a decade since its establishment, can it be sadly be concluded that NOCAL itself creates as many problems as it solves? In 2013/14, the cost of running this agency increase from 21.5 million to US$28.9 million despite the government budget shortfall of over US$47m with additional US$67m on the verge of being unattainable. According to the NOCAL 2011/2012 budget, the President the Company Mr. Randolph McClain received US$12,000 as salary monthly; thus earning a staggering US$144,000 yearly. Mr. McCain also received US$103,800 as allowance and benefit, totaling US$247,800 yearly for the same fiscal period.  Mr. McCain also increased his monthly salary from $12,000 to US$13,310 monthly, increasing his annual salary to US$159,720. He also increased his annual benefit from US$103,800 to US$118,668.00 to NOCAL budget. For entertaining himself, the NOCAL budget reveals Mr. McClain took US$1,500 monthly; while in the 2012/2013 budget, this amount was increased to US$1,650. For  For housing, the NOCAL budget show that Mr. McCain got US$3,500 in the 2011/2012 fiscal budget, but the amount was increased to US$3,850 in the 2012/2013. For calling cards, the NOCAL boss received US$250 monthly in 2011/2012 fiscal period. The amount was also increased to US$275 in 2012/2013 budget. According to the NOCAL budget, Dr. McClain received US$8,650.00 as monthly allowances and benefit for 2011/2012 but he sharply increased his benefits in the 2012/2013 budget to US$9,889.00 monthly. Dr. McClain’s personal benefits were also increased from US$235.767.00 to US$520,954.00 in the 2012/2013 budget.

Dr. McClain approved in the 2012/13 budget for the entity to spend Fifteen Thousand United States Dollars (US$15,000.00) on “Solar System” Twenty-six Thousand Four Hundred Thirteen United States Dollars (US$26,413.00) for “SAGE Upgrade-Accounting System” and Five Hundred Thousand United States Dollars (US$500,000.00) for “Payroll System (SAP). Is it not evident from these figures that this agency is only concerned with paying and receiving extravagant salaries at the expense of over 4.2 million Liberians who live on less than a dollar a day? One would even wonder what good comes of all these Legislative committee hearings if they cannot bring about desperately needed change like cutting recurrent costs and raising capital expenditure in MDAs.

The NOCAL as a licensing agency has failed Liberia woefully.  It has become a major participant in corruption cases as evidence in Former Chairman of NOCAL Mr. Clemenceau who’s admitted to giving bribes to the 52nd National Legislatures for the ratification of past concession contracts in the country’s oil sector. The exploration of oil supposed to be a blessing in nature and Liberians expect the acceleration of development and growth in the Liberia economy. Our oil revenues should provide the avenues to invest in the future through massive infrastructure build-out, educating our people, ensuring their health and well-being, and equality of opportunity for all not only for the President, her family and cronies.

Most of our problems as a country can be traced to our mismanagement of our natural resources. And what we do going forward can convert this blessing into a greater curse, or the reverse. Like most things in life, it is about the choices our leaders make today that determine the future of millions. The vision of the 90s led to creation of the NOCAL in April 2000. The desire was to create a Liberia-owned and managed oil industry via the instrumentality of the NOCAL not President Sirleaf, her family and cronies. Those crafter of the Act creating NOCAL saw joint ventures as temporary measures to enable Liberia acquire the education, expertise and exposure necessary to take control of the commanding heights of the emerging sector economy, including the petroleum industry. The Malaysians took similar steps by creating the Petroleum National Berhad (Petronas), which holds exclusive ownership rights to all oil and gas exploration and production projects in Malaysia. Unlike the NOCAL, Petronas has since its incorporation grown to be an integrated international oil and gas company with business interests in 31 countries. It was ranked as the 75th largest corporation in the world in 2014 with net revenue of 94.3 billion the 16th most profitable. It has even bid for and acquired oil blocks in Nigeria. NOCAL is still a passive partner in an array of joint ventures, entirely dependent on treasury funding!

Our emerging oil and gas industry is at a crossroads. NOCAL is perceived as corrupt, opaque and dysfunctional. Its financial solvency and stability are questionable. Its true participation in the industry insignificant, and its unchecked power not matched with responsibility. We as a people need to be aware that the oil exploration or discovery in our country can be a curse judging from oil producing African countries experiences or can be a blessing if mechanisms are put in place in making use of the new found wealth for the sake of developing the country and investing in Liberia’s long-term prosperity as well as preserving our environment for future generations. We are watching!

The writer, Seltue Karweaye, holds BA in Criminal Justice minor in Political Science from Metropolitan States University in Minnesota, USA; M.S in Development Studies and M.S in Politics and International studies from Uppsala University in Uppsala, Sweden. Email: seltue.karweaye.4687@student.uu.se or karweayee@gmail.com