africa

Yale Center for the Study of Globalization
Tanzania is not alone in facing this potential transformation. To the south, Mozambique,
whose territorial waters encompass an even larger proportion of the Rovuma
Basin field 1 , faces the prospect of even larger natural gas finds while, to the north,
exploration and development is moving ahead rapidly in Uganda, Kenya, and offshore
Somalia.
The economic potential of these finds is enormous but the challenges associated
with translating resource wealth into sustained growth and employment are equally
formidable. The authorities must navigate a complex, multi-stage process running
from upstream contracting through the development of an appropriate fiscal regime
to capture revenue, to the implementation of a suite of macroeconomic, public expenditure,
and industrial policy decisions required to deploy fiscal revenues in support
of the growth of the (labor-intensive) non-resource economy. As such, it is a process
that is vulnerable to the “weakest link” problem: each stage in the process must
work and failure at any one stage compromises the overall development objectives.
Given the long lead times involved (typically around seven years from the initial
investment decision to the generation of commercially realizable export revenues)
the authorities still have time to tackle these issues. There is a very substantial
literature and body of evidence on how best these stages can be successfully
negotiated (see for example IMF, 2012) along with plenty of case study evidence
on what not to do (Collier and Venables, 2011).
This short paper distils this literature in order to identify some key policy issues facing
the authorities in Tanzania over the coming years. In doing so it contributes to
an already vigorous public debate on natural resource management in Tanzania. 2
Before getting to these lessons, I first briefly discuss the history of natural gas in
the region (Section 24.2) and place current developments in the Indian Ocean in
the broader context of the global gas market (Section 24.3). Section 24.4 focuses
on policy lessons.
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