Oil Discovery in Zambia: An Opportunity or a Curse?

The Zambian Government awarded oil exploration licenses on November 19, 2009 to seven companies to commence the exploration of oil. The country's minister of mines was on record that four of the exploration licenses were awarded to foreign companies. How these companies were ultimately selected and awarded exploration contracts was never explained and is thus subject to conjecture. The most important thing is that the Government has finally made strides in terms of inching closer to realities of oil exploration. The immediate extent of exploration has been reported to encompass 11 exploration blocks in the Northwestern, Western, and Eastern Provinces of Zambia. How much the companies selected and awarded with exploration licenses will invest in their ventures has not been disclosed. However, this particular information is long overdue as the levels of investments will be partial measure or indication of the commitment of the companies to deliver on their promises as contained in their tender bids. The Zambian public also deserves to know what these companies are staking to explore and exploit Zambia’s natural resource.

Ideally, the discovery of oil, the identification and selection of potential oil exploration companies should be a source of euphoria in a country that has been dependent on imported crude oil. However, there seems to be guarded hope in the country on one hand and resigned optimism on the other on account of the manner in which government has conducted business. Among others, the issue of corruption comes to mind more prominently in much the same way as a bad omen. The discovery of oil in Zambia is likely to turn out into a nightmare for the country should the ongoing corruption encroach into this oil industry just emerging in the country. If greed that has condemned millions of Zambians to poverty and eroded the economy and moral fibre of the society continues unabated, it may be a ripe ingredient and turning point for the peace that the country has enjoyed since independence.
How much Zambia stands to benefit once the oil exploration companies strike oil is shrouded in secrecy at the moment. However, the recent policy reversals and experiences in the mining sector leaves Zambians with subdued optimism. Zambians need to and must ask their government questions as to what is at stake for them in the event that oil was struck in quantities sufficient to warrant advancing to full production. The whole scenario is fuzzy as no-one has an inclination what taxation policy will apply to oil exploitation. The latter will determine the extent to which Zambia will benefit and the extent to which the whole exercise will turn out to be a futile.

Zambians may be rubbing their hands with glee that a panacea to the country’s economic ills is in sight and not too far off in the horizon. In Zambia, the production of a particular commodity from locally available resources is not in itself a guarantee that the final product will be cheaper than the same but imported product. A paragon of this is electricity whose production cost is about the lowest in Southern Africa and the owners of the resource (Zambians) have never been granted the opportunity to enjoy a low consumer tariff. What is at play here is greed, corruptionand inefficiency, which are all conveniently masked in high electricity tariffs.