Africa Arise: How African Countries Have Lost the Most out of Their National Resources

By Dr. Isaac Yak R. Tutdel

The continent of Africa is endowed with natural resources in each country.

Tapping into these resources provides a great opportunity for African countries to grow and develop. However, this vast wealth of resources cannot be tapped by the African countries because of a lack of capacity and Funds. Oil producing countries in Africa heavily rely on the expertise and resources of Foreign Oil companies to help them exploit the oil.

The foreign Oil companies signed contracts with the unsuspecting African countries to help them benefits from their resources.

Those contracts are not the same that are signed internationally. They are steeped towards the benefit of the foreign oil companies. This book examines what went wrong and suggest some remedies to maximize the benefits of those national natural resources. Examples are drawn from the study conducted in the Republic of South Sudan’s oil sector.

• Language: English
• Publisher: Xlibris US
• Release date: Oct 28, 2021
• ISBN: 9781664179516

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Copyright © 2021 by Dr. Isaac Yak R. Tutdel.

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Cover Design by Kenneth Kiggundu

Rev. date: 10/28/2021

Xlibris

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CONTENTS

Foreword

Acknowledgments

Endorsements

Introduction

Part 1: Understanding the Hemorrhage

Chapter 1 Why We Lose Revenue

Chapter 2 How Revenue Is Lost

Chapter 3 Local Content and Its Implication

Chapter 4 Understanding Oil Contracts

Chapter 5 The Oil Curse

Part 2: The South Sudan Case

Chapter 6 Brief History

Chapter 7 The Petroleum Act in South Sudan

Chapter 8 Fiscal Arrangement in South Sudan

Chapter 9 Governance of the Petroleum Sector in South Sudan

Chapter 10 Nature of Existing Fiscal Models in South Sudan’s Petroleum Sector

Part 3: Way Forward: South Sudan And Africa

Chapter 11 Way Forward

Chapter 12 The importance of the New Model and Its Implications

FOREWORD

This is foremost a significant book on the exploitation of natural resources on the African continent, and while it dwells primarily on oil resources, it speaks to all other extractive resources. And as Dr. Isaac Yak R. Tutdel notes of the remit of the book as a wake-up call to Africa, to its policy makers, heads of state, technocrats, and its patriotic peoples.

As an author, Dr. Tutdel’s exposition of the exploitation of African natural resources is in fact a hemorrhaging of wealth that could go a long way to lifting standards of life and livelihoods of the peoples of African countries where these resources are located. As with anything on the continent that requires human input, the effort of that is engaged by African technocrats, politicians, and leaders in relation to oil (and other natural) resources is imbued with ignorance, self-serving interests, and corruption. Dr. Tutdel exposes the long-term one-sided contracts signed based on models beneficial to oil companies at the expense of African peoples. Additionally, he addresses the good governance and transparency issues that are often lacking in management of Africa’s oil resources. Crucially, he highlights the failures of accountability for the natural resources as the result of corrupt and nontransparent governance and weak civic engagement. This exposition lays bare the way Africa loses out on its oil resources.

Further, Dr. Tutdel explores a no go-to subject of local content in terms of its implications, and concludes that existence of such a subject in a country’s oil laws and regulations is not worth the paper they are written on if African governments plan on leaving the planning for local content to oil companies. In his view, this factual situation has tended to yield insignificant fruits and compounds the hemorrhaging of oil wealth. Therefore, he urges African governments to enforce local content provisions and obligations.

As an issue he identifies for Africa’s oil, Dr. Tutdel highlights the need to understand the oil contracts—especially production sharing contracts/agreements—to avoid the one-sided contracts based on models beneficial to oil companies. Additionally, he urges the need to understand petroleum fiscal regimes or systems.

As is common with oil resources, Dr. Tutdel explores the oil curse in the context of the loss of oil wealth in Africa. Much of what he exposes ties into the good governance and transparency issues in Africa, as oil resources give way to rentier elites and patronage networks as African leaders adopt authoritarian streaks in the wake of such resources.

The rest of the book sees Dr. Tutdel explore the situation of South Sudan as a young state that attained independence in 2011 in relation to its oil resources, addressing its legal framework from the 2011 transitional constitution to its 2012 petroleum law, as well as the oil fiscal arrangements and governance of the petroleum sector. Additionally, he addresses the nature of existing fiscal models, defined by production sharing contracts, for the country’s petroleum sector. At the end, in painting a future for Africa and its oil resources, Dr. Tutdel addresses the key aspects of oil contracts such as financial modelling and fiscal terms, and leaves it to Africa to explore viability of their use and implementation in relation to existing signed oil contracts.

All in all, Dr. Tutdel’s book is a worthy read for any patriotic technocrat, politician, and leader in Africa as it offers a head-scratching rethinking of what, as a continent, we have been doing wrong that has resulted in the hemorrhaging of oil wealth all these years and decades!

Francis Gimara, SC

Team Leader, ALP East Africa

October 2020

ACKNOWLEDGMENTS

First and foremost, my gratitude goes to the Almighty God who premeditated for me the accomplishment of this long academic journey. Gratefully I express my heartfelt appreciation to my mentor and supervisor Professor Dr. Wang Zhen of the Academy of Chinese Energy Strategy for his detailed, persistent, excellent, and constructive supervision and guidance. His wisdom, experience, and unwavering scientific knowledge made it possible for me to finalize my dissertation, which was a seed that germinated into this book.

I am obliged to the Zhenhua Oil Company for the financial support rendered to me during the entire period of the study in China. Humble verses are not sufficient to express my indebtedness to the Zhenhua Oil Company, but my commitment to their intention to serve my country, South Sudan, is my major encounter.

Above all, I am indebted to my young family, especially my best friend and beloved wife Liepbitda Stephen Kulang Jiech and my kids Boumkouth, Marnaath, Nyawec, and Goa Isaac Yak R. Tutdel and Ditkuar Isaac Yak R. Tutdel for the moral support you have always accorded me. I love you. To my relatives, colleagues, and friends, thanks for your unceasing pieces of advice and unwavering cooperation and contribution toward the achievement of my academic title and publication of this book. To mention but a few, Dr. John Gai Nyuot Yoh, William Mawich Repha Tutdel, Rev. Stephen Kulang Jiech Chuol, Peter Gatkek Riek Kulang, Ezekiel Gorey Dang, Jeach Chuol Gai, Dill Koang Ruei, Douglas Nordlinger, Dr. Liu MingMing, Ambimelech Paye Gbatu, Moses Gatkuoth Lony, Cheng and many others. My distinctive gratitude goes to all my respondents, including government officials, community leaders, and elders who spared their golden time for me to conduct interview with them for the first-hand information. I am grateful to my parents, particularly my dear mother, Mary Nyagor Tutghar Malek Thian, who struggled very hard to bring me up through all the sufferings that she has gone through. Last but not the least, I thank all the writers of the references that I have used during the writing of this book.

To be fair enough to each and every family member, this publication cannot omit the inclusion of Jal Isaac Yak R. Tutdel, the youngest child in the family, to have his share of recognition in the eyes of public readers. Jul Jul, as sometimes nicknamed, you shall stand the luck of the hard work of your parents.

I thank Daniel Johnston, for permitting me to use his illustrations. These illustrations are taken from the books: International Petroleum Fiscal Systems and Production Sharing Contracts (PennWell Books), 1994 and International Exploration Economics, Risk, and Contract Analysis (PennWell Books), 2003.

Finally, I express my sincere appreciation to my consultants AuthorPad, specifically Julius Rubanga and Lawrence Namale, for rendering me your expertise and guidance. I thank you for your willingness to work with me on this book and your steadfast collaboration throughout the project.

ENDORSEMENTS

This is a must-read book for anyone interested in natural resources in Africa. It offers a rich tapestry of a subject that should interest policy makers, political leaders, academicians—professors as well as students—and generally any avid reader. The lessons and experiences for South Sudan, a young country that inherited oil contracts and has been bedeviled by conflict, are instructive. This book, having been written by a law scholar and one who taught law at the University of Juba, should be listed in readings for law students (and for that matter, any student in a discipline that entails understanding the country’s extractive resources sector). More importantly, the book offers insight and lessons on oil contracting and financial modelling that provide options for Africa and ensure that, as a continent, its people start to harness the benefits of its natural resources. The notion of permanent sovereignty over natural resources, as enunciated by a 1962 UN General Assembly resolution, and couched as a peoples’ right in Africa’s 1981 Banjul Charter, should cease to be hollow.

Dr. Henry Onoria

IDLO Legal Education Advisor to the College of Law,

University of Juba, 2011–2017

Dr. Tutdel, an oil expert, unravels the information that has been hidden from the common man in the oil industry. His book will open your eyes and at the same time draw your interest to this lucrative industry that is key in most economies, more so those that actually produce the oil. By penning down his knowledge gained out of experience and careful study of the industry, Dr. Tutdel has shown the good feeling and passion he has for the continent of Africa. And if his knowledge is put into consideration, Africa will not be left behind, especially if we all rally behind him and implement the recommendations he has put forward. This book Africa Arise indeed is a manual of greatness because it uncovers the hidden truths behind this lucrative industry that is not known to the common man, who is also a stakeholder. I unreservedly endorse this life-changing book and encourage all people from all walks of life to read and reflect on the ideas it stands for. A truly great gift to this rudderless generation and continent. This book surely is a must-read.

Serunjogi Arthur Duncan

Operations Director, La-Cedri Bureau De Change

Author of Yes! From success to significance

INTRODUCTION

Africa. Whenever that name is mentioned in any forum there will be interesting things being discussed. Some will talk about our wars. Others will talk about our supposed ignorance, laziness, and apathy. Still, some will talk about the hope of the future and the potential that we possess. No doubt there are positive things that you can discuss about Africa all day long.

My passion is about the potential that we possess as a continent. I get so concerned about the wealth of national and natural resources we have been blessed with as a continent that we are not fully harnessing. The vast continent of Africa represents an intriguing tapestry of resource, wealth, and far-reaching economic possibilities. This has always been the case from time immemorial. Even today, the potency available in the African continent in terms of the reserves of wealth in minerals and natural resources is astounding.

The greatest paradox, though, is that where this wealth is found, we also find dismal human conditions. We find poverty untold where there is an abundance or even an overflow of potential wealth. We find wars and skirmishes where there are hints of treasure. We find mismanagement where there is a semblance of stability. Perhaps the greatest itch that I have found out is the sheer loss of revenue that would emanate from our oil wells and other minerals because we are ignorant!

The question of contracts that African nations have with contractors over the exploitation of Africa’s natural resources is something that must be addressed. It is easy for the news headlines to scream when one African fights another, but all along the exploitation done on African soil by these large multinationals is one of the greatest talking points in fiscal matters that is never addressed. It is seldom in the public domain in African countries what kind of contracts our states have with foreign multinational countries.

There are countries in Africa that have recently discovered considerable amounts of oil deposits as late as 2010. Unfortunately, these countries are still signing those contracts that hemorrhage their revenue to the tune of billions of dollars each waking day! I get so worked up realizing how much difference it would make if we in Africa were in total control of our own natural resources’ exploration and use. One would think that our sovereignty as countries is enough to protect us from exploitation. Sovereignty with ignorance is as good as staying in chains.

When an African nation is reported to have discovered oil or any other natural mineral deposit, there is glee and hope. There is excitement. In the throes of the created excitement and hope, contracts are signed that shamelessly pillage the African nation for years without respite. Lack of capacity, lack of knowledge, lack of management, and general impatience on our part could be firmly attributed to this pillaging of our treasures from Cairo to Cape Town. Each African country has its own story. However, if you investigated the contracts that African countries have signed for the exploitation of their natural resources, you will be shocked. In most cases, these contracts are not the same contracts that are used internationally.

Where the rubber meets the road, ignorance is our greatest undoing. When we are setting up our fiscal models, we are, generally, unaware of what we could gain. We hire experts to school us in the process but we are never informed to our advantage. If Uganda as a country knew what they were getting into, they would not have signed the oil exploration contracts that they did. If Kenya knew what they were getting into, they would not be happy to announce, as President Kenyatta did in July 2019, how much revenue was generated. It is peanuts, to say the least.

This is a wake-up call to Africa. In writing this book, I intend to communicate to different groups of people. First, I intend to communicate to the policy makers in all African countries. My message to you is simple: Get knowledgeable and get patriotic. Look at where you have loopholes in all your fiscal models and clog them up.

Second, I intend to get through to heads of states in Africa. You need to rise and see how much better it could be. There is one thing that only you can champion: that is to make sure that your country, under your leadership, has created excellent fiscal models that will form a basis for awarding contracts to any foreign multinational company in exploration of resources in your country. As you do, make sure that your people, the African people, are built up to oversee operations in the medium term.

Third, I intend to get through to all the technocrats, especially in the oil sector. You must be knowledgeable enough and you must build capacity in Africa as a matter of urgency. It should be your responsibility to make sure that the organizational structure of the company exploring resources in your country has as many Africans as possible.

Lastly, I intend to reach out to every patriotic person in an African country. It is you who belongs to such organizations as the media, as well as civil society. It is you who makes voting decisions every now and then. You must