Opinion / 8 October 2017, 09:40am / Shannon Ebrahim - The Global Spotlight
Tensions may be simmering between US Secretary of State Rex Tillerson and President Donald Trump over his "moron" comment, but if he remains in his job his “oil diplomacy” will continue its negative impact on the African continent.
Since Tillerson became chief executive of ExxonMobil in 2006, his interest in Africa was driven by the need to maximise profits in terms of Exxon’s oil investments. The thinking that informed his interaction with African states was “the right kind of dictators can be more predictable and profitable than democracies”.
Oil projects require huge amounts of capital and only pay off fully over decades. This means companies such as Exxon prefer countries with political stability, which is often equated with authoritarian rule. The key is to be able to predict what the country will be like in two decades' time. With this in mind, Exxon has cut deals with long-serving leaders in major oil producing countries such as Angola, Equatorial Guinea and Chad. President Jose Eduardo dos Santos was in power in Angola from 1979 until this year and has accumulated a net worth of US$20 billion (R275bn) largely thanks to the oil industry. President Teodoro Obiang Nguema Mbasogo has been President of Equatorial Guinea since 1979 and has accumulated a net worth of US$600m (R8bn) and President Idris Deby has been in power in Chad since 1990, and is worth US$50m (R688m).
All three presidents have amassed their wealth with Exxon as the company with a major stake in the oil industry in all three countries. ExxonMobil is the largest oil producer in Equatorial Guinea, while the ExxonMobil-led consortium in Chad produces most of the country’s oil, and ExxonMobil and Chevron account for one third of Angola’s oil production.
As the largest oil company in the world not owned by a state, and with profits more than the GDPs of more than half the countries in the world, ExxonMobil exerts significant influence. When the entire US aid and military spending directed through the US embassy in Chad totalled US$20m in the mid 2000’s, but the royalty payments from ExxonMobil totalled US$500m (R7bn), Tillerson as chief executive of ExxonMobil was in reality more important than the US Secretary of State.
But now as Secretary of State, Tillerson will continue to prioritise the interests of US oil industry shareholders. It is also important to note that Tillerson only has to recuse himself from matters relating to ExxonMobil for the first two years of his term as Secretary of State.
The negative fallout of this insidious relationship between ExxonMobil as well as other oil giants and African strongmen is that development has fallen by the wayside. In Chad, President Deby had initially pledged 80% of oil revenue towards social development in education, health, agriculture and infrastructure, but he quickly reneged on this. Chad is considered one of the poorest countries in the world. As for Equatorial Guinea, it is also one of the poorest countries in the world even though the oil boom increased the size of the economy 20-fold since the 1990s. The country is known as the “Kuwait of Africa” due to its sizable offshore oil deposits, but most of the revenue has also been squandered by the ruling family who have amassed property in the US, Brazil, and Europe, while its citizens live on less than US$2 a day.
Last year President Obiang appointed his son as vice- president, whose fortune includes a US$100m (R1.3bn) 250ft yacht, 11 luxury cars, a villa in Malibu, California, a Gulfstream jet, a yacht in Morocco, and Michael Jackson’s crystal-encrusted glove. The corruption is greased by the bribery of the oil majors. In 2004, US federal auditors fined a bank in Washington where Exxon and other oil companies had deposited hundreds of millions of dollars in payments for the use of oil fields. Increments of US$250000 from US oil companies had been deposited into the accounts of Chadian officials and members of the ruling family.
In Angola, the state oil company Sonangol withholds financial information about sale prices and bonuses paid by companies such as Exxon to purchase concessions for exploration and drilling. Last June President Dos Santos fired the Sonangol board and gave control of the company to his daughter Isabel, said to be worth US$3.8bn, and the richest woman in Africa.
For as long as Tillerson is US Secretary of State, the profit motive driving US multinationals in Africa will be central to US considerations. The need to develop some of the poorest countries in the world will not enter the equation, and African strongmen will continue to amass their fortunes.